Will My Credit Card Close If I Don’t Use It?

Credit card issuers can close accounts due to prolonged inactivity, a practice that can sometimes occur without prior notification to the cardholder. Understanding the circumstances under which this happens and its potential implications can help manage credit effectively.

Reasons for Account Closure

Credit card issuers close inactive accounts for business reasons. Maintaining dormant accounts incurs administrative costs, including record-keeping, customer service, and allocating credit lines that don’t generate revenue. Inactive accounts do not generate income from transaction fees or interest charges.

Issuers also mitigate risks from unused credit lines, such as a cardholder accruing significant debt during financial hardship. Closing inactive accounts allows companies to reallocate available credit to active customers, optimizing their lending capacity.

Defining Account Inactivity

Account inactivity, from a credit card issuer’s perspective, refers to the absence of purchase transactions. Actions like checking your balance, making a payment, or setting up automatic bill payments do not count as activity preventing closure. The specific period after which an account is considered inactive varies significantly among issuers, ranging from a few months to two or three years.

While some issuers might flag an account after six months of no purchases, others may allow a card to remain dormant for a year or longer before considering closure. These timeframes are at the discretion of the individual credit card company, with no universal standard.

Impact on Your Credit

The closure of a credit card account can affect an individual’s credit score. One significant factor is the credit utilization ratio, which measures the amount of credit used against total available credit. When an account closes, total available credit decreases, potentially increasing this ratio if balances exist on other cards. A higher utilization ratio negatively impacts credit scores.

Another consideration is the average age of accounts, which contributes to the length of credit history. If the closed card was one of an individual’s oldest accounts, its removal could shorten the average age of accounts. Closed accounts in good standing typically remain on credit reports for up to 10 years, while accounts with negative payment history may stay for seven years.

Preventing Account Closure

Individuals can take proactive steps to prevent their credit card accounts from being closed due to inactivity. Making small, occasional purchases is an effective strategy to keep an account active. This could involve using the card for minor everyday expenses, such as a cup of coffee or a recurring streaming service subscription. Ensuring these small charges are paid off in full each month avoids accumulating interest and demonstrates responsible credit use.

Another method is to set up a small, recurring bill payment, such such as a utility bill or a monthly subscription, to be charged to the card. This provides consistent activity. Periodically reviewing account statements or logging into online portals can help monitor for any inactivity warnings or communications from the issuer. If concerned, directly contacting the credit card issuer to inquire about their inactivity policy or to confirm account status.