If you have a credit card, you may have heard that your account can be closed due to inactivity. This can happen if you don't use your card for an extended period of time or if you don't make the minimum required payments. While this may not seem like a big deal, it can actually have a significant impact on your credit score and make it more difficult to obtain credit in the future.
According to the Consumer Financial Protection Bureau (CFPB), when your credit card account is closed due to inactivity, it can have a number of negative consequences. First, it can hurt your credit score. The reason for this is because when a credit card account gets shut down you also lose the line of credit that came along with it. When you have a smaller line of credit overall, you need to utilize a higher percentage of your total credit allowance every month.
For example, if you have 2 credit cards, each with a $5,000 credit limit ($10k total) and you spend $1,000 a month between the 2, you are using 10% of your total line of credit. However, if one of those credit cards is closed, you lose $5,000 of your total credit which causes your credit utilization to go up to (an unhealthy) 20%.
Second, having your credit card account closed due to inactivity can look suspicious to banks and other lenders. When they do a credit check, they will see that your account has been closed and may wonder why. This can make them less likely to approve you for credit, as they may see you as a higher risk. According to CreditCards.com, "If your credit card account is closed by the issuer, it can hurt your credit score, especially if you have a long history with the card or it's your only credit card."
Third, when your credit card is closed it will bring down the average age of your credit cards. Lenders like to see multiple old lines of credit when deciding whether or not to lend you money or approve you for a mortgage. When you close an old credit card you lose the age that came along with it.
Fourh, having your credit card account closed due to inactivity can also be inconvenient. If you have been using your card for a long time and have established a good payment history, closing your account can disrupt your financial habits and make it more difficult to pay bills or make purchases.
Fortunately, there are steps you can take to prevent your credit card from being closed due to inactivity. Here are a few tips to help you keep your account active and maintain a healthy credit score:
- Use your credit card regularly. One of the easiest ways to prevent your account from being closed due to inactivity is to use your card on a regular basis. This can include things like making small purchases, paying bi4lls, or even using your card for everyday expenses like groceries or gas. By using your card regularly, you can show that you are an active user and help prevent your account from being closed.
- Set up automatic payments. One way to make sure that you always make at least the minimum required payment is to set up automatic payments. This means that the minimum payment will be automatically charged to your card each month, so you don't have to worry about remembering to make the payment yourself. This can help prevent your account from being closed due to inactivity, and it can also help you avoid late fees or other penalties.
- Consider using a service to keep your account active. If you are worried about your credit card being closed due to inactivity, you may want to consider using a service like Credicated to help keep your account active. Credicated charges your rarely used credit card less than $1 a month (or less then $5 a year) to keep your credit card account open and active, which means you don't have to worry about your account being closed due to inactivity. This can provide peace of mind and help you build a high credit score.
By following these tips, you can help prevent your credit card from being closed due to inactivity. This can help you maintain a healthy credit score and ensure that you have access to credit when you need it. Whether you use your credit card regularly, make at least the minimum required payment, or consider using a service like Credicated, taking these steps can help you avoid the negative consequences of an inactive credit card account.
To find out more about Credicated, and to learn how we can help prevent your credit cards from being closed due to inactivity, click here.
