What Happens if I Don’t Use My Credit Card?

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Credit cards are a great financial tool in today’s time. It provides you extra support when faced with a cash crunch at the end of the month and even makes your finances more manageable. But what happens if you get a credit card and don’t use it for months?

What is Credit Card Inactivity?

When you don’t use your credit card for a long period of time, it is known as credit card inactivity. The credit card issuer deactivates your card after crossing a set duration of time without using it. This duration of dormancy is different and depends from one provider to another. Usually, a credit card issuer will deactivate your credit card if you don’t use it for more than six months, but again, this period is different for different cards and banks.

What Happens if I Don’t Use My Credit Card?

If you don’t use your credit card for an extended period, there are several consequences that may happen, which may not fall in your favour. Below are some reasons why you should not keep your card inactive for a long time:

Inactivity Fees

Inactivity fees on a credit card are charges that the card issuer may apply if the card hasn’t been used for an extended period, often spanning several months or a year. The purpose behind these fees is to motivate cardholders to continue using their cards regularly. While not every credit card company enforces inactivity fees, those that do usually include the specifics in the card’s terms and conditions. Being mindful of these fees is crucial, as they can accumulate over time and increase the overall expense of keeping the credit card.
Closed Account

Credit card companies often close accounts due to inactivity to help mitigate risks for the issuer. An unused card can be more vulnerable to fraudulent activity, as cardholders may not closely monitor an account they don’t regularly use. By closing these accounts, credit card companies reduce the chances of unauthorised use, which could lead to financial losses and damage to the company’s reputation. Overall, closing inactive accounts allows credit card companies to protect their interests while streamlining their operations.
Expired Rewards

If your credit card account remains inactive for a certain period, there’s a chance that some of your rewards and benefits could expire. Additionally, if your account is closed before you have a chance to redeem your rewards, you’ll forfeit them entirely.
Annual Fees

Even if you haven’t used your credit card over the past few months, you still have to pay the annual fees if you want to keep it. To maximise your card’s value, your earned rewards should outweigh the annual fee. Otherwise, if you’re paying for a credit card that offers no real benefits, you’ll end up losing money over time. So, if you are paying the annual fees, you might as well just use the card.
Dropped Credit Score

If you don’t use a credit card, it generally won’t have much impact on your credit score. However, the situation shifts when you decide to cancel it. Closing credit cards with the highest limits can potentially cause the most damage.

Your credit usage, often referred to as credit utilisation, is the second most significant factor influencing your credit score. It’s calculated both for individual cards and across all your credit accounts. Financial experts suggest keeping your credit usage below 30% of your total limit, with the top scorers often staying under 10%. Keeping an unused credit card active can help lower your credit utilisation ratio, positively affecting your credit score. The longer you hold onto credit, the better it is for your score.
Interest Rate

Interest will still accumulate on any outstanding balances, even if you’ve stopped using your card. Ignoring it won’t make it disappear. Failing to make at least the minimum payment could lead to late fees and a drop in your credit score. To avoid letting your credit card debt get out of control, continue reducing your balance, even if you’re taking a break from new purchases.

How to Prevent Credit Card Inactivity

To keep your credit card from being deactivated, consider these practical steps:

Regular Small Purchases

Make a small purchase with your credit card to ensure it remains active. This not only helps keep the card in use but also allows you to monitor any unauthorised transactions.
Recurring Payments

Set up automatic payments for subscriptions or bills to maintain consistent activity.
Balance Transfers

If you have a balance on one credit card, consider transferring it to another card and converting it into manageable EMIs.
Pay Your Bills

Always pay your bills on time. If you’ve maxed out your credit limit, your card issuer might temporarily deactivate the card until the outstanding balance is cleared.

What to Do in Case of Credit Card Deactivation?

If your credit card has been deactivated due to inactivity, here are steps you can take to avoid future complications:

Reach out to the issuer for reactivation

Sometimes, a simple follow-up can get your card reactivated. It’s a good idea to send a written request to the issuer, emphasising your consistent on-time payments and solid credit history as reasons for reactivation.
Review your credit score

If your deactivated credit card had a significant credit limit, its closure might negatively impact your credit score due to an increased credit utilisation ratio. Check your credit score to assess the impact. If there’s a noticeable decline, take steps to rebuild your credit.
Keep an eye on your credit report for closure

Regularly review your credit report to confirm that the deactivated card is marked as closed and that there are no outstanding balances associated with it.

Bottom Line

Grasping the consequences of letting your credit card sit idle is crucial for managing your credit responsibly. To keep your credit score in good shape and take full advantage of your card’s benefits, it’s important to use it regularly and steer clear of inactivity fees.