Does Not Using Your Credit Card Hurt Your Credit Score?

Does not using a credit card hurt your credit score? Surprisingly, it can. Many cardholders don't realize that letting their credit cards sit idle for extended periods might lead to unexpected consequences.

In fact, if you stop using your card completely, your issuer can close your account without warning, typically after a year or more of inactivity. This closure directly affects your credit in two significant ways. First, it can increase your credit utilization ratio—a factor that accounts for 30% of your FICO score. Second, it might shorten your credit history length, which represents 15% of your overall score. What happens if you don't use your credit card also extends beyond score impacts—you could lose access to credit when you need it most. While you won't face inactivity fees (these are banned by law), the potential damage to your credit profile is reason enough to develop a strategy for those cards collecting dust in your wallet.

Not using your credit card doesn't directly lower your score, but it can indirectly affect it. If your card issuer closes your account due to inactivity, it may increase your credit utilization ratio and potentially shorten your credit history length, both of which can negatively impact your credit score.

Is it bad to have a credit card and not use it?

Having a credit card you never use isn't necessarily bad, but it can have unexpected consequences for your financial health. Let's explore the reasons behind unused cards and what really happens when they gather dust.

Why people avoid using certain cards

Many people, particularly millennials, deliberately avoid using credit cards. According to a survey by Bankrate, 63% of millennials don't have credit cards, compared to just 35% of adults over 30.

The primary reasons people avoid certain cards include:

• Fear of accumulating debt that's difficult to pay off

• High interest rates and unexpected fees

• Cash advance fees (typically about $10 or 5%, whichever is larger)

• Concern about unauthorized charges and penalty interest

• Annual fees that aren't worth the benefits

As 24-year-old Melissa Pileiro told Bankrate, "I don't really feel like there's a need for one in the way I live my life. The idea with a credit card is you're essentially putting money down that you don't have".

Common myths about keeping a small balance

One particularly widespread misconception is that carrying a small balance on your credit card helps your credit score. Remarkably, about two-thirds of Americans believe this myth, with the percentage rising to 79% among Gen Z consumers.

In reality, carrying a balance—no matter how small—simply costs you money in interest charges. As credit expert Matt Schulz points out, "The myth hurts cardholders because it costs them money. If they're only carrying a small balance, it may not cost them a huge amount of money, but over time, it adds up".

Furthermore, this myth likely stems from confusion with the idea that you need to keep a card active. While dormant cards may indeed risk closure, you don't need to carry a balance—just using the card periodically and paying it off in full is sufficient

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What happens if I don't use my credit card at all?

When a credit card sits unused, your issuer may eventually close the account due to inactivity. Though timeframes vary between issuers, this typically occurs after a year or more of non-use.

The consequences can be significant:

• Your credit utilization ratio may increase, potentially lowering your score

• Your credit history length could be affected, especially if it's an older account

• Your credit mix might be diminished, particularly if it's your only revolving credit

• You won't be notified before closure—issuers aren't required to warn you

To maintain an inactive card, consider putting a small recurring subscription on it and setting up automatic payments. Visit CreditCardRewardsPro.com for more strategies on managing unused cards effectively.

What happens if your credit card becomes inactive

Credit card inactivity can lead to serious consequences you might not expect. Unlike inactive bank accounts that might just sit dormant, unused credit cards often face decisive action from issuers.

Issuer policies on inactivity

Each credit card company sets its own timeline for when they consider an account inactive. Typically, this ranges anywhere from six months to three years without transactions. Wells Fargo, for instance, generally closes accounts after two to three years of inactivity.

Why do issuers close dormant accounts? Primarily because inactive cards cost them money without generating revenue from transaction fees or interest charges. Moreover, card companies have limited credit they can extend to customers, so they'd rather reallocate your unused credit line to someone who will use it.

For active management tips on your unused cards, visit CreditCardRewardsPro.com.

Will you be notified before closure?

Unfortunately, credit card companies aren't required to give you advance notice before closing your account due to inactivity. Despite the Credit Card Act of 2009 requiring 45 days' notice for major account changes, courts have decided that closures due to inactivity don't qualify for this protection.

Some issuers like Wells Fargo do provide warnings and instructions to avoid closure, yet this courtesy isn't universal. Once an account is closed, getting it reinstated can be challenging—though contacting your issuer immediately after closure might give you a chance at negotiating reinstatement.

How inactivity affects rewards and fees

Leaving a credit card dormant can impact your finances in several ways:

• Lost rewards and benefits: Any accumulated points, cashback, or miles may expire when your account becomes inactive

• Continued annual fees: You'll still be charged annual fees regardless of whether you use the card

• No inactivity fees: Thankfully, dormancy or inactivity fees were banned in 2010 under an amendment to the Truth in Lending Act

To prevent these issues, consider placing a small recurring monthly charge on rarely-used cards. Setting up autopay for these small charges ensures your account stays active without requiring constant attention.

How unused cards impact your credit score

Unused credit cards affect your credit score in three specific ways, even if they're not closed by your issuer. Knowing these impacts can help you decide whether to keep or cancel those dormant plastic rectangles in your wallet.

Credit utilization explained with examples

Credit utilization represents the percentage of available credit you're using and accounts for 30% of your FICO score. Naturally, lower utilization rates generally benefit your credit score.

Consider this example: You have three credit cards with $5,000 total available credit and $1,000 in total balances, making your utilization ratio 20%. If your unused card with a $2,000 limit gets closed, your available credit drops to $3,000, consequently raising your utilization to 33% with the same $1,000 balance.

Most experts recommend keeping utilization below 30%, as higher rates may indicate financial stress to lenders. Additionally, those with exceptional credit scores (800-850) typically maintain utilization rates around 6.5%.

Why credit history length matters

Length of credit history influences 15% of your FICO score. When an account closes due to inactivity, it remains on your credit report for 10 years if in good standing. After that period, it "falls off" your report, potentially reducing both your average account age and the age of your oldest account.

This matters specifically because creditors view longer credit histories as indicators of financial responsibility. Given that even a small percentage change can impact your score significantly, maintaining older accounts is usually worthwhile.

The role of credit mix in your score

Your credit mix—the diversity of credit account types you maintain—determines 10% of your FICO score. This includes revolving accounts (credit cards) and installment loans (mortgages, auto loans).

Lenders prefer seeing that you can manage different types of credit responsibly. If your unused card represents your only revolving credit, closing it could negatively impact this diversity. To learn more about optimizing your credit mix, visit CreditCardRewardsPro.com.

Smart ways to manage unused credit cards

Keeping dormant credit cards active requires strategic management. Instead of letting unused cards languish in your wallet, consider these practical approaches to maintain them without harming your credit score.

Use it for a subscription or utility bill

Setting up a small recurring payment on your unused card is perhaps the simplest way to keep it active. Most cellular, cable, and internet providers accept credit card payments without charging convenience fees. Streaming services like Netflix, Hulu, and Spotify are likewise excellent candidates for this strategy. By coupling these charges with autopay, you'll avoid late payments while maintaining card activity.

Avoid cards with high annual fees

Unused cards with high annual fees can drain your finances without providing corresponding benefits. Evaluate whether each card's rewards align with your spending habits. If you rarely use travel perks or dining rewards, the annual fee might not justify keeping the card. Importantly, a no-annual-fee card is often easier to manage with "less hassle, less worry".

Consider switching to a no-fee version

Nevertheless, before canceling a card with an annual fee, contact your issuer about "product changing" to a no-fee version of the same card. This approach preserves your account history while eliminating fees. Product changes keep your credit card account open, merely altering the attached features. Subsequently, you'll maintain the credit score benefits without ongoing costs.

Track your usage with budgeting tools

Monitoring inactive cards is crucial for detecting fraudulent activity. Many credit card issuers offer digital tools that categorize purchases, allow transaction searches, and generate detailed spending reports. Alternatively, budgeting apps can track spending across all accounts simultaneously. Capital One customers, for instance, can view full lists of recurring payments through their online banking account or mobile app.

Learn more at CreditCardRewardsPro.com

Concerning additional strategies for managing unused credit cards, visit CreditCardRewardsPro.com. Their guides offer detailed advice on maintaining credit health while maximizing card benefits. Learn about optimizing your card selection, keeping old cards active without unnecessary costs, and leveraging digital tools for better credit management.

Conclusion

Unused credit cards can therefore impact your financial health in ways most cardholders don't anticipate. Above all, maintaining activity on your cards protects your credit utilization ratio and preserves your credit history length – two factors that collectively make up 45% of your FICO score. Consequently, the "out of sight, out of mind" approach often leads to unwelcome surprises when accounts close without warning.

However, keeping cards active doesn't mean carrying balances or paying unnecessary interest. Simply putting a small recurring charge on each card and setting up autopay provides sufficient activity to keep accounts open. For cards with annual fees, consider whether the benefits justify the cost or explore product change options to no-annual-fee alternatives.

The credit card landscape changes regularly, making it essential to stay informed about best practices. CreditCardRewardsPro.com offers detailed guides on managing dormant cards effectively, including specific strategies for preserving your credit history while minimizing hassle. These resources also explain how to optimize your credit mix for long-term financial health.

Remember that unused doesn't have to mean unusable. With thoughtful management strategies, those rarely-used cards can still contribute positively to your credit profile rather than becoming liabilities. Your future self will thank you for the few minutes spent today ensuring your credit cards remain assets rather than obstacles on your financial journey.

FAQs

Q1. Will my credit score drop if I don't use my credit card? Not using your credit card doesn't directly lower your score, but it can indirectly affect it. If your card issuer closes your account due to inactivity, it may increase your credit utilization ratio and potentially shorten your credit history length, both of which can negatively impact your credit score.

Q2. How often should I use my credit card to keep it active? To keep your credit card active, it's generally recommended to use it at least once every few months. Setting up a small recurring charge, like a monthly subscription service, and paying it off in full each month is an easy way to maintain activity without risking debt.

Q3. Is it true that carrying a small balance on my credit card helps my credit score? No, this is a common myth. Carrying a balance, no matter how small, does not help your credit score. In fact, it only results in unnecessary interest charges. It's best to use your card regularly and pay off the full balance each month.

Q4. What happens if my credit card issuer closes my account due to inactivity? If your account is closed due to inactivity, it can affect your credit utilization ratio and potentially your credit history length. Your issuer is not required to notify you before closing the account. Once closed, it may be difficult to reopen, and you'll lose access to that credit line.

Q5. How can I manage multiple credit cards without using them all regularly? To manage multiple cards, consider using each one for a small recurring payment and set up automatic payments to ensure timely bill payment. For cards with annual fees, evaluate if the benefits justify the cost or look into switching to a no-fee version. Using budgeting tools can help you track usage across all your cards efficiently.