It’s common for many Americans to hold multiple credit cards, but in the shuffle of a busy life, it’s easy to let one sit idle. While letting a card gather dust might seem harmless, it can lead to unintended financial consequences. You might even wonder if it’s better to simply cancel the card yourself. This guide explores the impact of a dormant credit card and how you can protect your financial health.
Does not using your card actually matter?
If you stop using a credit card, the issuer won’t immediately close it. Extended inactivity can cause problems, though.
Your issuer may close the account
If you stop using your credit card, it is common for the issuer to close the account. There is no set industry timeframe for the rules governing credit card inactivity, but it’s fair to expect that if you haven’t used your card within a year, a creditor will likely flag the account.
Some credit card companies will notify you of potential closure by mail, allowing you to use it to avoid closure. Others will simply close the account.
Your credit limit could be reduced
If the issuer doesn’t close your account due to inactivity, reducing your available credit limit is a possibility. Some creditors opt for this route before fully closing an account. Credit card companies do this to reduce risk on their part, as a lack of use on your part communicates disinterest.
Reducing your credit limit may seem harmless, but it can negatively impact your credit utilization ratio, which in turn affects your credit score.
You may lose unused rewards
Most credit card rewards programs don’t terminate points, but an inactive credit card can result in the loss of points. Each program operates differently, but if you don’t keep the card in good standing, credit card rewards may expire.
If you’re concerned about losing rewards due to inactivity, it’s best to transfer or use your points before they expire. Don’t overlook transferring points to another card if that’s a possibility.
➤ SEE MORE:Inside the wallets of 2,800 Americans: Key trends in credit card habits
How credit scores are affected by inactivity
Many consumers ask, “Does not using a credit card hurt your credit score?” and are often surprised by the answer. Even if your issuer keeps the account open, dormancy can trigger a chain reaction of other factors that negatively impact your credit health.
Impact on credit utilization ratio
Credit utilization is an essential part of your credit score. In fact, it makes up 30% of your total score. The ratio is determined by dividing your outstanding balances on a revolving basis by your total available credit. If the creditor reduces your credit limit, it may negatively impact your credit score if you have outstanding balances on other credit cards.
For example, if you currently have $7,500 in balances across your cards and have a total available credit of $30,000, which is reduced to $25,000, your utilization will rise from 25% to 30%. Since most experts suggest keeping a ratio under 30%, this could ding your credit.
➤ FREE TOOL:Credit utilization calculator
Effect on length of credit history
The length of credit history is another key factor in your credit score. If a creditor closes your account, it will eventually stop contributing to your average account age, ultimately hurting your credit score. Length of credit history comprises 15% of your credit score.
While it may be tempting to close an account you no longer use, keeping an older credit card active is typically advisable. Even using it for just one or two small charges a year helps protect your credit score by preserving your average account age—a key factor that lenders use to determine your financial reliability.
Changes to your credit mix
Credit mix is an often-overlooked aspect of credit that refers to the various types of credit you have. This can include credit cards, auto loans, personal loans, and mortgages. Having a healthy mix makes you a more attractive customer to potential creditors.
If a credit card company closes your account, it may narrow your mix, possibly hurting your credit. Credit mix comprises 10% of your credit score, so the impact may be minimal.
Is it bad not to use a credit card?
Not using a credit card isn’t bad, per se, but there are some risks. Here’s what to consider if you’re wondering ‘Is it bad to have a credit card and not use it?’
No inactivity fees, but other risks exist
Fortunately, inactivity fees are no longer common practice for most credit cards. The lack of those fees aside, you face other hazards if you don’t use a credit card.
Account closure, loss of rewards, and potential credit score impacts can be more costly in the long run. It may be wise to use the credit card for a small monthly charge to protect against such risks.
You may miss fraudulent charges
Not using a credit card can unnecessarily cause you to miss fraudulent charges, particularly if you don’t review statements. There were over 449,000 reports of credit card fraud in 2024, according to the Federal Trade Commission.
If you regularly use a credit card and monitor statements, you have a better chance of catching suspected fraud early.
Recurring charges can go unnoticed
Automatic payments can be a helpful way to pay for subscription services. However, when a credit card is closed due to inactivity, it can impact automatic payments and potentially cause service disruptions.
How to keep your credit card active without overspending
Keeping a credit card active is not an invitation to incur unnecessary debt. Wise usage can foster healthy spending habits and prevent account closure without being overly difficult.
Use it for small recurring charges
How often should I use my credit card is a common question for people facing potential account closure. There’s no industry standard, but using the card to pay for a small, recurring charge is a simple way to avoid overspending.
Consider linking the card to a streaming service or other small subscription to keep the card active. Then, pay it off monthly to avoid interest. Not only will this keep your card active, but it’s also a healthy use of credit.
Set up autopay to avoid missed payments
Life gets busy, and it’s easy to forget to make a monthly payment. Missing even a small payment can negatively impact your credit history and cause late fees and interest to be added to your account.
Signing up for autopay on the credit card is a good way to avoid this problem. Your bill will be paid on time each month, and it keeps your card in good standing.
Consider downgrading to a no-fee card
Canceling a credit card is always a possibility, but it can needlessly hurt your credit. If the card has an annual fee, research to see if the issuer has a no-annual fee card that is more suitable for you.
Downgrading to a no-fee card allows you to retain your credit line and account age, while avoiding payment for features that are unimportant to you.
➤ SEE MORE:Guide to credit card product changes
Monitor your account regularly
Forgetting about your credit card is a good way to communicate to the creditor that you don’t care about the account. Log in monthly to your account to review activity or rewards.
It’s common for credit card companies to track engagement, so activity may keep your account from being flagged. That’s not to mention that it allows you to notice fraud sooner.
Bottom line
A dormant credit card may not seem problematic, but inactivity can quietly impact your credit health or rewards in ways you don’t want. Using your credit card for small, recurring charges is a simple way to keep your card in good standing. Doing so also gives the side benefit of improving your credit score.
