Credit cards have various uses, such as making everyday purchases, buying big-ticket items, and transferring balances to save on interest. If you have one or more credit cards that you hardly use, you probably won’t face penalty fees or an immediate impact on your credit score. However, keep in mind that some card issuers may deactivate unused accounts over time, which could eventually affect your credit score.
Let’s Know What Happens If Credit Card Stays Unused For a Long Time
Credit Card Account May Get Closed
People who have credit cards they don’t use often may not pay much attention to the card’s statements or notifications. This is usually not a problem when there’s no balance to pay off. However, if the card remains inactive for a long time, the card issuer may decide to close the account. The exact timeframe for this can vary from one issuer to another. To find out when your account might be deactivated due to lack of use, it’s a good idea to contact your card issuer directly.
Credit card companies don’t have to warn you before closing your account. Some might give you a chance to keep it open, but they don’t have to. Usually, just making one purchase with the card is enough to keep it active.
Closing an account may not matter much to some people, but if you have a low total credit limit, it could hurt your credit score.
Keeping your oldest credit accounts is a good idea because your credit history’s length makes up 15% of your credit score. When you close an account, it doesn’t immediately impact your credit history’s age because the closed account stays on your credit report for a while. However, those closed accounts won’t keep getting older, and they’ll eventually be removed from your credit report.
Credit Score May Take an Intense Drop
Your maximum credit limit is the total amount of credit available across all your credit accounts. The credit utilization ratio, which makes up 30% of your credit score, is calculated by adding up your balances on these accounts and comparing them to the total credit limit. When you close a credit card account, it reduces your maximum credit limit, which could increase your credit utilization rate.
Should You Close a Credit Card You Never Use?
You can close your credit card under specific conditions, and it is okay to do so:
- This credit card account is not so old.
- You’re not using more than 30% of your total credit.
- There’s no good reason to keep the card, like getting rewards, cashback, or a low interest rate.