What Happens If You Don't Use Your Credit Card?
If you have a credit card that you haven't used in a while, you might be wondering what will happen if you continue to not use it. Credit cards can be a useful financial tool, but they also come with their own set of rules and consequences. In this article, we'll explore what happens if you don't use your credit card and how you can easily keep your account active.
First, let's address the question of how long you can go without using your credit card before the issuer closes your account. While there is no set time frame for when an issuer will close a credit card account due to inactivity, it's generally recommended to use your credit card at least once every 3-6 months. This will show the issuer that the account is being used and is not at risk for fraud or misuse. Additionally, credit card issuers take into consideration the credit utilization ratio, which is the amount of credit you are using compared to your maximum credit limit. To maintain a healthy credit score, it's important to keep your credit utilization ratio below 30%. This means that if your credit card has a maximum limit of $1,000, you should aim to keep your balance below $300.
So, what happens if you don't use your credit card and your account becomes inactive?
One potential consequence is that your credit card issuer may close your account. Credit card companies make money from the fees and interest they charge their customers. When a credit card is not being used, the issuer is not making any money from it. Additionally, credit card companies may consider an inactive account to be a higher risk for fraud or misuse. As a result, they may decide to close the account to minimize this risk.
If your credit card issuer does decide to close your account due to inactivity, it can have a negative impact on your credit score. Credit bureaus consider the length of your credit history when calculating your credit score, and having a credit card account closed can shorten your credit history and lower your score. Additionally, if you have a high credit limit on the closed account, it could also decrease your credit utilization ratio and negatively impact your score. One blogger writes of a 75-point credit score drop after his oldest credit card was closed due to prolonged inactivity!
So, how can you prevent your credit card from being closed due to inactivity?
One solution is to set up automatic payments on your credit card to ensure that it is being used regularly. You could set up a recurring monthly payment for a small subscription service or utility bill, for example. This will help to keep your credit card active and demonstrate to the issuer that you are using it responsibly.
Another option is to use a service like Credicated, which allows you to pay a small fee of $.99 per month, $2.99 every 6 months, or $4.99 every year to have your credit card charged and kept active. This can be a convenient solution if you have multiple credit cards and find it difficult to keep track of which ones you are using and when. By using Credicated, you don't have to worry about a credit line being closed due to inactivity.
Also, every month that you use your credit card for a small purchase and pay off the balance on time shows the credit bureaus that you borrow money responsibly. Using Credicated also helps build your credit score by ensuring you have a low monthly balance on all your credit cards instead of letting them sit unused.
What Can You Do After Your Credit Card Has Already Been Closed by the Issuer Due to Inactivity?
If your credit card has already been closed by the issuer due to inactivity, there are a few things you can do to minimize the negative impact on your credit score. Here are a few options to consider:
- Check your credit report: After your credit card has been closed, it's a good idea to check your credit report to make sure the account is being reported accurately. If you find any errors on your report, you can dispute them with the credit bureau to have them corrected.
- Keep your other accounts active: If you have other credit card accounts that are still active, make sure to use them regularly to show that you are a responsible borrower. This can help to offset the negative impact of having an account closed.
- Open a new credit card: If you don't have any other active credit card accounts, consider opening a new one. This will help to increase your credit utilization ratio and demonstrate that you are a responsible borrower. Just be sure to use the new credit card responsibly and pay off your balance in full or keep it below 30% of your credit limit.
- Consider a credit-builder loan: If you are having trouble getting approved for a new credit card, a credit-builder loan can be a good option. This type of loan is designed to help you build or rebuild your credit by making regular payments on a loan with a small balance. As you make payments on the loan, the lender will report your activity to the credit bureaus, which can help to improve your credit score.
By following these steps, you can work to repair any damage to your credit score caused by having a credit card account closed due to inactivity. It's important to be proactive and take steps to demonstrate that you are a responsible borrower, as this can help to improve your credit score and make it easier to get approved for credit in the future.
FAQ:
How often should I use my credit card to keep it active?
It's generally recommended to use your credit card at least once every 3-6 months to avoid having the account closed due to inactivity.
What happens if I don't use my credit card for a month?
If you don't use your credit card for a month, it's unlikely that your issuer will close your account. However, it's still a good idea to use your credit card at least once every 3-6 months to avoid having the account closed due to inactivity.
What happens if I don't use my credit card for a long time?
If you don't use your credit card for an extended period of time, your issuer may decide to close the account due to inactivity. This can have a negative impact on your credit score and raise red flags with credit bureaus when they do a credit check. To prevent your credit card from being closed due to inactivity, make sure to use it at least once every 3-6 months.
How can I prevent my credit card from being closed due to inactivity?
To prevent your credit card from being closed due to inactivity, make sure to use it at least once every 3-6 months. You can also consider setting up automatic payments on your credit card or using a service like Credicated to have your credit card charged and kept active.
Can credit card issuers close my account due to inactivity?
Yes, credit card issuers can close your account due to inactivity. If you don't use your credit card for an extended period of time, your issuer may decide to close the account due to inactivity. This can have a negative impact on your credit score and raise red flags with credit bureaus when they do a credit check. To prevent your credit card from being closed due to inactivity, make sure to use it at least once every 3-6 months.
What is credit utilization ratio and why is it important?
Credit utilization ratio is the amount of credit you are using compared to your maximum credit limit. It is an important factor in your credit score, as credit bureaus consider how much of your available credit you are using when calculating your score. To maintain a healthy credit score, it's important to keep your credit utilization ratio below 30%. This means that if your credit card has a maximum limit of $1,000, you should aim to keep your balance below $300.
To learn more about how Credicated can help your credit card accounts stay open, active and healthy click here!
