What Happens If You Don’t Use Your Credit Card? Consequences of Card Neglect

Have a credit card you haven’t used in awhile and wondering what happens if you don’t use your credit card? We break it down…

Updated February 2024
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Fact checked by John Wayman

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Credit cards are ubiquitous and have simplified our financial lives in many ways. They offer convenience, security, and rewards for regular usage. However, many credit cardholders do not use their cards frequently, resulting in credit card neglect.

While it may seem innocuous, credit card neglect can have far-reaching consequences, impacting your credit score, rewards, and even your account status.

Let’s explore the consequences of credit card neglect and how you can avoid them.

Understanding Credit Card Inactivity

Before diving into the potential consequences of credit card neglect, let’s define the term. Credit card inactivity refers to a period during which a cardholder does not make any purchases or pay off their balance. Some credit card issuers may also consider an account inactive if there has been no payment for a certain period. A card can become inactive after just a few months of inactivity, depending on the issuer’s policies.

Credit card inactivity can differ between credit card issuers. While some issuers require a purchase every few months, the vast majority require a payment to be made within a particular billing cycle. It’s always best to double-check with your credit card issuer’s policy when it comes to inactivity to understand how much time you have before it becomes an issue.

There are various reasons why credit card inactivity can happen. One reason is a change in spending habits. For example, if a cardholder used to use their credit card for all their purchases but has recently switched to using cash or a debit card, their credit card may become inactive. Another reason is getting a new credit card. If a cardholder receives a new credit card with better rewards or a lower interest rate, they may stop using their old card, leading to inactivity.

Financial constraints can also lead to credit card inactivity. If a cardholder experiences financial difficulties and cannot pay their balance, their account may become dormant. In this situation, it’s essential to contact the credit card issuer and attempt to work out a payment plan to avoid negative consequences.

Consequences of Credit Card Inactivity

One consequence of credit card inactivity is the potential for the card issuer to close the account. If a credit card has been inactive for a certain period, the issuer may decide to close the account to minimize its risk. This can have a negative impact on the cardholder’s credit score, as it can decrease the overall length of their credit history and increase their credit utilization ratio.

Another consequence of credit card inactivity is the potential for the issuer to lower the card’s credit limit. If a credit card has been inactive for a while, the issuer may decide to lower the credit limit to minimize its risk. This can also negatively impact the cardholder’s credit score, as it can increase their credit utilization ratio.

It’s important to note that even if a credit card is inactive, the cardholder is still responsible for paying any fees or interest charges that may accrue. It’s crucial to monitor credit card activity regularly and pay off any balances in full to avoid negative consequences.

The average person in the USA has 4 credit cards

Key Differences Between Fixed and Variable Rate Credit Cards

The Impact on Your Credit Score

Credit card inactivity can negatively affect your credit score, which can lead to bigger consequences down the road.

How Credit Utilization Affects Your Score

Credit utilization is a significant factor in determining your credit score. Utilization refers to the proportion of your credit limit that you use in a given billing cycle. When you use a credit card, you are essentially borrowing money from the credit card issuer, and your credit limit is the maximum amount you can borrow. If you have a credit limit of $10,000 and you use $5,000, your utilization ratio is 50%.

When a credit card account becomes inactive, it can impact your utilization ratio. If you have multiple credit cards and you stop using one of them, your overall credit utilization may decrease, which can have a positive impact on your credit score. However, if you only have one credit card and you stop using it, your credit utilization ratio may remain the same or even increase if you have other debts or loans. If your utilization ratio is high, it can result in a decrease in your credit score.

The Role of Credit History Length

If you have a long and healthy credit history, it can positively impact your score. In contrast, a short credit history can lower your score. When a credit card account becomes inactive, it may no longer contribute to your credit history length. As a result, it can negatively impact your credit score.

For example, let’s say you have a credit card that you’ve had for 10 years, and you’ve always paid your bills on time. This credit card has a significant impact on your credit history length, and it shows that you have a long and healthy credit history. If you stop using this credit card, it may no longer contribute to your credit history length, which can lower your credit score.

On the other hand, if you have a credit card that you’ve only had for a year, and you stop using it, it may not have a significant impact on your credit history length. However, if you have multiple credit cards and you stop using all of them, it can have a negative impact on your credit history length, which can lower your credit score.

How to Prevent Credit Card Inactivity

If you want to prevent credit card inactivity from negatively impacting your credit score, there are several steps you can take:

  • Use your credit card regularly for small purchases and pay off the balance in full each month.
  • Set up automatic payments for your credit card bills to ensure that you never miss a payment.
  • If you have multiple credit cards, rotate the ones you use to prevent any of them from becoming inactive.
  • Consider setting up a recurring payment, such as a subscription or utility bill, on your credit card to ensure that it is used regularly.

By taking these steps, you can ensure that your credit cards remain active and continue to contribute to your credit score.

Account Closure and Its Effects

Credit card issuers may close inactive accounts, leading to potential consequences. It’s essential to understand why credit card companies close dormant accounts and how it can impact your credit score.

Why Credit Card Issuers Close Inactive Accounts

Credit card companies may close dormant accounts for various reasons, such as a lack of usage or to reduce operational costs. It’s always worth checking with your issuer to determine their policy regarding inactive accounts.

However, it’s important to note that credit card companies are required to notify you before closing your account. They must provide written notice at least 45 days before the closure, giving you ample time to use the account or make other arrangements.

If you receive a notice that your account will be closed due to inactivity, it’s best to use the card for small purchases and pay them off immediately to keep the account active.

How Account Closure Impacts Your Credit

Credit utilization, length of credit history, and the credit mix are all crucial factors that contribute to your credit score. If a credit card account is closed, it can result in reduced credit availability, affecting your credit utilization.

Credit utilization is the amount of credit you’re using compared to your total available credit. If you have a credit card with a $5,000 limit and a balance of $1,000, your credit utilization is 20%. If the credit card company closes the account, your available credit drops to $0, and your credit utilization jumps to 100%, which can negatively impact your credit score.

Additionally, closing a long-standing account can also result in a decrease in your credit history length. Credit history length is the amount of time you’ve had credit accounts open. The longer your credit history, the better it is for your credit score. If you close a credit card account that you’ve had for several years, it can shorten your credit history length, which can negatively impact your credit score.

It’s crucial to keep your credit card accounts active, even if you’re not using them regularly. If you receive a notice that your account will be closed due to inactivity, use the card for small purchases and pay them off immediately to keep the account active. This will help you maintain a healthy credit score and avoid any negative consequences of account closure.

Missed Benefits and Rewards

Inactive credit card accounts can lead to missed benefits and rewards that come with regular usage. Using your credit card frequently can help you earn rewards, cashback, and bonuses that can be used to save money or make purchases. However, failing to use your credit card can lead to a loss of these benefits.

Forfeiting Reward Points and Cash Back

When you don’t use your credit card, you may forfeit your reward points and cashback. Many credit card companies offer reward programs that allow you to earn points or cash back for every dollar you spend. These rewards can be redeemed for a variety of things, such as travel, merchandise, or statement credits. However, some rewards may have an expiration date, and failure to use your credit card can mean that you miss out on rewards before they expire.

For example, let’s say you have a credit card that offers 1% cashback on all purchases. If you spend $1,000 a month on your credit card, you would earn $120 in cashback over the course of a year. However, if you don’t use your credit card for several months, you could miss out on that$120 in cashback rewards.

Loss of Sign-Up Bonuses and Promotional Offers

New credit cards often come with sign-up bonuses and promotional offers. These rewards incentivize regular usage, and if a card is inactive, you may miss out on benefits that come with the new credit card. For example, a credit card may offer a sign-up bonus of 50,000 points if you spend $3,000 in the first three months of opening the account. You may miss out on this bonus if you don’t use your credit card frequently.

In addition, credit card companies often offer promotional offers, such as 0% APR for a certain period of time or waived balance transfer fees. These offers can save you money on interest and fees, but they typically require you to use your credit card regularly. If you don’t use your credit card, you may miss out on these promotional offers.

Overall, failing to use your credit card can lead to a loss of benefits and rewards. By using your credit card regularly, you can earn rewards, cashback, and bonuses that can be used to save money or make purchases.

Americans spent about $1.5T on their credit cards last year

Maintaining a Healthy Credit Card Relationship

Keeping a healthy credit card relationship is key to avoiding credit card neglect. Credit cards can be a valuable tool for building your credit score and earning rewards, but it’s important to use them responsibly. Here are some tips for maintaining a healthy credit card relationship.

Tips for Keeping Your Credit Card Active

  • Set up automatic payments for recurring expenses like Netflix or Hulu to keep your card active. This can help you avoid forgetting to make payments and potentially damaging your credit score.
  • Make small purchases with your credit card, such as gas or groceries, and pay them off quickly. This can help you avoid carrying a balance and accruing interest charges.
  • Use your card frequently for all your expenses and pay it off promptly. This can help you build a positive payment history and improve your credit score.

Balancing Multiple Credit Cards

When you have multiple credit cards, balancing your usage is crucial to avoid neglecting any account. You can either use a strategic approach, based on incentives for each credit card, or make a schedule that ensures that each card gets regular usage.

One strategy for balancing multiple credit cards is to use each card for specific types of purchases. For example, you might use one card for groceries and another for gas. This can help you maximize rewards and avoid overspending on any one card.

Another strategy is to make a schedule for using each card. For example, you might use one card for the first week of the month, another for the second week, and so on. This can help you ensure that each card gets regular usage and that you don’t accidentally neglect any accounts.

Ultimately, the key to maintaining a healthy credit card relationship is to use your cards responsibly and stay on top of your payments. By following these tips, you can build a positive credit history and make the most of your credit cards.

When to Consider Closing a Credit Card

While avoiding credit card neglect is essential, there may come a time when you need to consider closing an account. It is important to understand the circumstances under which closing a credit card may be beneficial to you.

High Annual Fees and Interest Rates

If a credit card has a high annual fee or interest rate, it may not be beneficial for you to keep it open. In contrast, you may want to consider more suitable options that don’t come with too many fees and charges. High fees and interest rates can add up quickly, costing you a lot of money over time. By closing the account, you can avoid these unnecessary expenses and save money in the long run.

Simplifying Your Financial Life

If you have too many credit cards and cannot keep track of them all, it may be a wise decision to consolidate your cards, closing inactive accounts. This can simplify your financial life and enable you to focus on maintaining a healthy credit card relationship. Keeping track of multiple credit cards can be overwhelming and stressful, and can lead to missed payments and other financial mistakes. By consolidating and closing inactive accounts, you can streamline your finances and reduce the risk of financial mismanagement.

It is important to note that closing a credit card account can impact your credit score. This is because your credit score is based in part on the length of your credit history and the amount of available credit you have. Closing a credit card account can reduce the amount of available credit you have, which can in turn lower your credit score. However, if you have several credit cards and are only closing one, the impact on your credit score may be minimal.

Ultimately, the decision to close a credit card account should be based on your individual financial situation and goals. If you are considering closing a credit card account, it may be helpful to speak with a financial advisor or credit counselor to discuss your options and determine the best course of action.

Credit card neglect can have consequences that extend beyond the present, leading to potential long-term negative impacts on your credit score, rewards, and account status. It’s best to avoid putting your credit card into neglect. With a mindful approach and strategic usage, you can maintain a robust credit card relationship and continue to reap the benefits of using a credit card while minimizing the risks.

Editor's Note:

At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions are our own and have not been provided, reviewed, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.

Meet the Author:

Cody Beecham

Cody Beecham

Founder/Owner/Editor/Author

Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School. 

After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.

Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income. 

He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?

Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.