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Your credit score probably won’t drop if you don’t use your cards regularly, but make sure you understand the details before you stop using one or more credit cards. In general, not using a credit card is a good thing, as it means you’re not amassing debt. However, there can be some unintended negative consequences if you’re not careful.
When is a credit card considered inactive?
What it takes for a credit card to be marked inactive actually varies from lender to lender. Generally speaking, not using your credit card for just a few weeks won’t make it inactive. For most card lenders, a card has to not be used for over six months to a year before it’s considered inactive.
Possible consequences of inactivity
Not using a credit card can be a positive thing for many people. If you aren’t using a card, you’re not acquiring debt (or you’re acquiring less of it). Unfortunately, there are some possible negative consequences of inactivity that you should be aware of.
You could lose rewards
The majority of us choose our credit card based on the rewards offered. Many major banks offer comparable interest rates, but what makes a card stand out from a competitor’s card is its benefits. After all, if used responsibly, you can make your credit card work for you with travel rewards, cashback incentives or even perks like access to airport lounges.
Unfortunately, if your card is marked inactive, there’s a high probability you’ll lose any rewards you were collecting. This can especially sting if you had a significant amount saved up. If your credit card has a good amount of rewards on it, consider those rewards before stopping all activity on the card.
Your card could be canceled
Your card being canceled due to inactivity has the biggest potential for adverse consequences. The five credit factors that make up your score are:
- Payment history
- Credit utilization
- Length of credit history
- Credit mix
- New credit
Credit utilization is a big factor impacting your credit score. Your credit utilization ratio is the balance of credit available to you versus the amount of credit you use. Ideally, you want to keep your credit utilization ratio at or below 30 percent.
So, let’s say you have three credit cards: Credit Card A has a limit of $5,000, Credit Card B has a limit of $5,000 and Credit Card C has a limit of $10,000.
In an average month, you spend $4,000 out of the $20,000 you have available to you. So, your credit utilization is sitting at 20 percent. This is below 30 percent.
You decide that you don’t need to use all three credit cards and stop being active on Credit Card C. Due to your being inactive for over a year, the card is canceled.
Now, your available credit has dropped from $20,000 to $10,000. However, your spending has remained constant. So, you’re spending $4,000 a month when you have access to $10,000. This leaves you with a credit utilization of 40 percent, which is well above the recommended amount. As a result, your credit score could be affected.
That is what’s vital to understand about being inactive on a credit card—your score doesn’t have to be impacted if you’re smart about it.
Consider your card’s total credit limit versus all the credit available to you before choosing to be inactive on that card.
4 tips to follow if you have an unused credit card
1. Pay off the remaining balance
When you decide to be inactive on a card, pay it off in full. Be sure to check in on the card once a month to ensure no preauthorized or forgotten expenses show up on it. Even the smallest charge can start to accrue interest, become an unpaid debt and significantly hurt your credit.
2. Keep checking your account
After you stop using your card, it’s still important to check in on it regularly. This is to ensure you’re not missing any identity fraud that could be happening on the card. Imagine if someone gained access to your card and you only checked it once a year. That’s an entire year’s worth of purchases they could make in your name and let damage your credit.
The card is under your name, so even if you’re not using it, it’s your responsibility to check the account often for suspicious activity.
3. Decide if you want the account to stay open
You should keep your inactive cards open because it helps your credit utilization ratio. However, that doesn’t mean you have to keep a card open. If you genuinely aren’t benefiting from a card and can’t justify keeping it because the yearly fees are expensive, you could close it. Or, you might want to close a store department card that you never plan to use again.
Know that you can cancel your card, but be prepared for your credit score to drop. Luckily, you should be able to adjust your credit score with sound financial decisions.
4. Use the card every few months
If you want to avoid the possibility of your credit score being affected by inactivity, you can stop the card from being closed by using it every few months. Set a reminder in your calendar to use the card every once in a while and pay it off immediately. You get the benefit of keeping the card for your credit profile and credit utilization ratio but don’t have to use it often.
Make sure to check your credit score often. Your credit score can impact many areas of your life, so you must monitor it and improve it. If you’re unhappy with your credit score and you can see inaccurate negative items that are weighing you down, you can work with a credit repair service, like Lexington Law. Our team can analyze what’s impacting your credit and help you take the necessary steps to improve your score.
Reviewed by Miriam Allred, an Associate Attorney at Lexington Law Firm. Written by Lexington Law Firm.
Miriam Allred was born and raised in Southern California. After high school she joined the US Navy. She then went on to get an Economics degree from Chapman University where she got to enjoy an internship at the United States Supreme Court. Miriam then went to Brigham Young University where she received her Juris Doctor. Prior to joining Lexington Law, Miriam worked as a civil rights attorney dealing with discrimination and sexual harassment. In this role she helped write and create policies and investigate sexual harassment and discrimination complaints. Miriam also has experience in family law. Miriam is licensed to practice in Utah.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.