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You may open a new credit card just to have it in your wallet and never use it, or you may want to open an emergency credit card to use in specific emergency situations, or you've stopped using your old card and never closed it to keep your average age of credit accounts high. Whatever the reason you are not using your active credit card (or rarely use it), you should understand possible consequences.
The most evident consequence is that your issuer may reduce your credit limit or even close your account due to inactivity. Here are more potential consequences of not using your credit card:
- Changes to account status: When you do not use your credit card for quite a long time, the issuer may consider your account inactive and close it or lower your credit limit. Different issuers have different requirements for how long accounts should be inactive before any action is taken.
- Impact on credit score: Losing a credit card account can shorten your credit history, affect your credit utilization ratio, and impact your credit mix. All these factors influence your credit scores, and any negative changes can decrease your credit score. In rare cases, when the closed account is your only reported credit account, you may become credit invisible, meaning you will lose your credit score until new credit activity is reported to the credit bureaus.
- Overlooked fraudulent activity: Another dangerous risk of not using a credit card is that you might also stop looking at your statements. When you do not monitor your account, you may miss fraudulent activity or notice a fraudulent charge too late. The longer you overlook the card, the more damaging fraudulent activity can become.
- Overlooked charges: While you won't be charged for credit card inactivity, your card may have an annual fee that will be charged regardless of whether you are using your credit card or not. And if you do not pay annual fees, that may trigger other fees, like penalty fees or interest fees.
- Missed rewards and benefits: All unused rewards (cash back, points, or miles) usually expire once a card is closed. If the card has benefits like purchase protection, extended warranty, travel insurance, rental car coverage, or lounge access, those will be lost as well.
If you want to keep your credit card active, it's best to occasionally use it and check statements every month for suspicious activity. The key is to use it enough to keep it active. You may make a single, regular charge on the card to show necessary activity. For example, it can be a cellphone bill or a monthly steaming service payment. If the card has rewards, you can use it for gas purchases only or for grocery purchases, or you can make it your "coffee card." When you make small charges to the card, make sure you are paying the card balance in full by the due date to avoid interest and other unwanted fees.
However, if the card you do not use has a rather high annual fee, consider closing it. The high annual fee may negate benefits you can get from keeping the card active. You may want to weigh all the pros and cons of keeping such a card active before you decide whether you want to keep it or close it.
