What Happens If You Don’t Use Your Credit Card?

Imagine you open a credit card account for any reason. Say the credit card issuer had great reward points, or you just wanted to improve your credit score. Now imagine you’ve stopped using it. Maybe you got the points you needed, or your score improved enough for you to lease a car or an apartment. What happens to an unused credit card?

They can. Credit card accounts cost money to maintain. Unused credit cards are particularly expensive because issuers don’t make any money on processing fees. Since issuers can actually lose money on unused cards, they will sometimes cancel them.

This may not seem like a big deal. After all, you weren’t using that card anyway. So, what’s the harm? Unfortunately, there are several ways this can negatively affect you.

Your credit history is directly tied to your credit score, and that score is tied to nearly everything in adult life. Part of your credit score is the age of your credit card account, meaning that holding an account for longer could increase your score. Canceled credit card accounts don’t always affect your credit history. However, the average age of your credit will decrease, which could lower your credit score.

Card issuers don’t always cancel unused cards. Generally speaking, unless you’re paying an annual fee for a card you aren’t using, it’s a good idea to use your card a few times every month.

If you’re not using a credit card, then you probably aren’t checking your credit balance either (especially if it’s an old credit card). Failing to keep an eye on your credit activity leaves you vulnerable to identity theft or fraudulent charges. Your best bet is to keep an eye on your account, even if you’re not actively using that particular card.

Beyond the possibility of fraudulent charges or identity theft, you could have irregular payments set up on a rarely used card that goes unpaid. For example, you may have an annual or biennial membership fee, such as an antivirus or website hosting account. If these payments come out of an unused credit card – one that may have been closed – it will not only affect your credit score but could also result in a missed payment and late fees.

What does credit utilization ratio mean? Basically, it shows how much available credit you have access to compared to how much credit card debt you carry. So a canceled credit card decreases this amount.

Say you have three cards, one of which is canceled. The credit limit on that canceled card – say, $5,000 – is now unavailable to you. The less available credit you have to spread around, the higher your credit utilization ratio will be. Ideally, this should be as low as possible since, big surprise, this will affect your credit score.

Great question! Unfortunately, there isn’t a straightforward answer. There is no set period of inactivity that will trigger a cancellation. Some banks cancel your card within a short time frame (even six months or a year), while others won’t cancel your card unless it goes unused for a long period (several years). So you’ll want to reach out to your credit card issuer and get the answer from them.

Thankfully, as of 2010, the answer to this is no, but you’ll still need to pay an annual fee to your credit card issuers. Annual fees for a card that isn’t in use should be avoided for obvious reasons, so if you’re not going to use the credit card, it’s best to cancel it yourself. However, there are also a lot of reasons to keep credit cards you don’t use much.

Reward points are a common and great incentive to keep using a credit card and keep your account active. If you don’t want to use your card too often, it’s smart to make small purchases with it. These are easy to pay off, which will keep you in good standing with your credit card company and will increase your credit score. It will also help build credit, which a closed card will not do.

Beyond that, A consistent payment history will show your card issuer that you can be trusted, which may lead to an increase in total available credit. Even if you don’t use it all the time, access to more funds can help in an emergency.

If you’re in the market to get a new card, here are some to consider.

The more credit card accounts you have and the better you are at paying them, the more your credit score will improve. A good payment history on one credit card is good, but payments on multiple cards are even better. This could also raise your credit limit, which looks good on a credit report. Also, a higher credit score will make several things easier, such as securing personal loans from a bank.

However, be careful not to take on more credit cards than you can handle. You want to avoid going into credit card debt by any means necessary. (Editorial disclosure: I spent about three years paying off a credit card with only a $1,500 limit due to the amount of charged interest on the account because of missed payments. Don’t make the same mistake.) As with any financial decision, the choice of getting one or more additional credit cards should be taken very seriously.

If you have several unused credit cards, your best option is to cancel them, especially if they have annual fees. First, make sure that your credit card balance is paid off, then contact your credit card issuer. If you explain that you want to cancel because of the annual fee, most credit card issuers will offer to either waive the annual fee or convert your card into a fee-free credit card. Of course, there is no guarantee you will get this offer, but it’s certainly worth asking about.

When canceling a credit card, it’s a good idea to write down the credit card number, expiration date, and security code. Hang on to these in case of any fraudulent charges. Additionally, make a note of any recurring payments and set them up on a new credit card. Even a small purchase on a canceled card can decrease your credit score if it turns into a missed payment.

Yes! While it’s always a good idea to pay off your balance before closing a card, it’s not a big deal if you don’t. You’ll still be expected to make your payments on time, as you would if your credit card account was still active. In fact, if you can’t control your spending and want to stay out of credit card debt, cancellation is your safest course of action. Make sure to pay off your outstanding balance as soon as possible to avoid late fees and negative items on your credit report. You should definitely try to pay it off before applying for a new credit card.

It sure will. Canceling a credit card will impact your credit utilization, meaning the total available credit to which you have access. This will increase your ratio of debt to credit. However, a canceled card can still help your credit score (a little). Canceled credit cards remain on your credit report for ten years, so a card canceled in good standing will continue to contribute to your credit card mix and provide evidence of well-managed credit.

Please don’t rush into canceling a credit card since it will probably ding your score by a few points. Although it is often a good idea to cancel a credit card you never plan to use, it’s smart to use the credit cards you plan to keep periodically.