Credit cards have become an essential part of our daily lives, offering convenience and rewards for purchases. With more and more individuals turning to credit cards for their financial needs, it’s no surprise that many people have multiple credit cards in their wallets. However, with the availability of so many credit cards, it’s easy for some to go unused for extended periods.
This raises the question: will credit card close if not used? In this article, we will explore the impact of keeping inactive credit cards and provide insights on how to use them wisely to avoid any potential consequences.
The Importance of Regularly Using Your Credit Card
As mentioned earlier, credit cards offer numerous benefits such as rewards, convenience, and building credit history. However, these perks can only be enjoyed if you regularly use your credit card. If you leave your credit card idle for an extended period, you may be missing out on valuable rewards and damaging your credit score.
Maintaining a Good Credit Score
One of the main factors that determine a person’s credit score is their credit utilization ratio, which is the amount of credit they have used compared to their credit limit. By regularly using your credit card and paying off the balance in full each month, you can maintain a low credit utilization ratio, which can help improve your credit score.
On the other hand, if you don’t use your credit card at all, your credit utilization ratio will be zero, and this can negatively affect your credit score. Additionally, a closed credit card can also impact your credit score, as it reduces the overall amount of credit available to you.
Accumulating Rewards and Benefits
Many credit cards offer rewards and benefits for various types of purchases, such as travel, groceries, and gas. If you don’t use your credit card, you are missing out on earning these rewards and benefits. For example, if you have a rewards credit card that offers cashback on grocery purchases, but you don’t use it for your grocery shopping, you are essentially leaving money on the table.
Furthermore, some credit cards also offer perks like travel insurance, purchase protection, and extended warranties, which can come in handy when making big-ticket purchases. By not using your credit card, you are not taking advantage of these benefits, which can save you money and provide peace of mind.
Building Credit History
Another essential aspect of having a credit card is building a credit history. Lenders use credit reports to determine a person’s creditworthiness, and an inactive credit card may not be included in your credit report, leading to a lack of credit history.
Having a solid credit history is crucial when applying for loans or mortgages, as it shows lenders that you are responsible with credit and can make payments on time. Therefore, regularly using your credit card and making timely payments can help build a positive credit history and improve your chances of being approved for credit in the future.
What Happens When You Don’t Use Your Credit Card?
Now that we understand the importance of regularly using your credit card, let’s take a look at what happens when you don’t use it.
Inactivity Fees
Some credit card issuers may charge inactivity fees if you haven’t used your credit card for a certain period. These fees can range from a few dollars to even $25 per month, depending on the credit card issuer. If you have multiple credit cards that you don’t use, these fees can add up quickly and become an unnecessary expense.
To avoid incurring inactivity fees, consider setting up automatic payments for a small recurring expense, such as a subscription service, on your credit card. This will ensure that your credit card is being used, and you won’t have to worry about incurring any fees.
Risk of Closure
Most credit card issuers have the right to close your credit card if it remains inactive for an extended period. While every credit card issuer has its own policies, some may close your credit card after six months of inactivity, while others may do so after a year.
If you have a good track record with your credit card issuer and have made timely payments, they may not close your account immediately. However, it’s always best to check with your credit card issuer’s policies to avoid any unexpected closures.
Impact on Credit Score
As mentioned earlier, having a closed credit card can negatively affect your credit score, as it reduces the overall credit available to you and impacts your credit utilization ratio. Furthermore, closing a credit card also removes the length of credit history associated with that account, which can also impact your credit score.
If you have multiple credit cards, try to use each one at least once every few months. This will ensure that all your credit cards remain active, and you can take advantage of the benefits without any negative consequences on your credit score.
How to Use Inactive Credit Cards Wisely?
Now that we understand the potential consequences of leaving a credit card unused, let’s explore how to use them wisely to avoid any issues.
Set Reminder to Use Your Credit Card
With so many things going on in our lives, it’s easy to forget about using a specific credit card. To avoid this, set reminders to use your credit card at least once every few months. You can either set up a reminder on your phone or mark it on your calendar to ensure you don’t miss it.
Make Small Purchases
You don’t have to make big purchases to keep your credit card active. Even making small purchases, such as buying coffee or gas, can help keep your credit card active. Just be sure to pay off the balance in full every month to avoid any interest charges.
Monitor Your Credit Card Activity
Regularly checking your credit card statement can help you keep track of any fraudulent activity or unauthorized charges. It’s also a good practice to check your credit report regularly to ensure all your credit cards are being reported accurately. If you notice any errors or discrepancies, be sure to report them immediately.
FAQs
Q: Will my credit card close if I don’t use it for a long time?
A: It depends on the policies of your credit card issuer. Some may close your account after six months of inactivity, while others may do so after a year. It’s best to check with your credit card issuer’s policies to avoid any unexpected closures.
Q: Can an inactive credit card still affect my credit score?
A: Yes, having an inactive credit card can negatively affect your credit score. It can impact your credit utilization ratio and remove the length of credit history associated with that account. Therefore, it’s essential to use your credit card regularly to maintain a good credit score.
Q: Can I avoid inactivity fees on my credit card?
A: Yes, you can avoid inactivity fees by making small purchases or setting up automatic payments on your credit card for a recurring expense. This will ensure your credit card remains active and you won’t have to worry about incurring any fees.
Q: How can I make sure my credit card stays active?
A: You can set reminders to use your credit card regularly, make small purchases, and monitor your credit card activity to ensure it stays active. It’s also a good idea to check your credit report regularly to make sure all your credit cards are being reported accurately.
Q: Is it better to close an inactive credit card or keep it open?
A: It’s generally better to keep an inactive credit card open to avoid any negative impacts on your credit score. However, if your credit card issuer charges inactivity fees, it may be better to close the account to avoid these fees.
Conclusion
In conclusion, it’s important to regularly use your credit card to take advantage of its benefits and avoid any potential consequences. By setting reminders, making small purchases, and monitoring your credit card activity, you can ensure that your credit card stays active and maintains a positive impact on your credit score. Remember, it’s always best to check with your credit card issuer’s policies to understand the terms and conditions regarding inactive credit cards. Use your credit card wisely, and reap the rewards it has to offer.
