Credit cards are great financial tools when it comes to managing finances, building credit, or in times of emergency. Credit cards have proven their metal in society. This is the reason that in today’s time, everybody wants to have a credit card. In search of getting rewards and cashback from different credit cards, one applies for multiple credit cards but sometimes is not able to use all of them or they intentionally limit their credit card usage. Hence, out of all the credit cards that he owns, a card or maybe two might remain unused. Here, it is now important to understand what happens if I don’t use my credit card. What effect will inactivity have on your credit card or on your credit profile?
There are multiple reasons because of which you may stop using a credit card like may have multiple credit cards and now it has become difficult for you to keep a track of all your cards or the rewards and benefits of a particular card do not suit you anymore or etc. This generally might seem a good option to you as you would refrain yourself from overspending but you have to remember that you have just stopped using the credit card but the card still exists. You might have to face the consequences of not using a credit card that has been issued to you.
What will happen if you do not use your credit card
When you do not use your credit card for a long period of time (generally specified by the banks individually), the credit card issuer company may deactivate your credit card. The cards are not deactivated quickly, like over a period of 1 month of non-usage, but will be deactivated if not used over a period of 12 months. On the other hand, you are more likely to attract fraudulent activities towards your card which will further affect your credit rating. Also, you have to understand that you have just stopped using the card but the card is still in existence. Hence, charges such as AMC (Annual Maintainance Charges) would keep on adding to your credit card account.
Consequences of not using a credit card
To understand the consequences of not using a credit card for a long time, refer to the following points:
Neglect fraudulent activities:
When you stop using your credit card, there are high chances that you might stop looking at your credit card statement as well. Now some credit card issuers might issue a credit card statement even if there is no activity in the account but many of the issuers generate statements only when some activity takes place. By not getting statements, you tend to get into the habit of not checking your credit card account every month. You will not be able to know about any inappropriate transaction that has taken place through your account and you will then be liable to pay for all such transactions if the fraud is not reported to the bank within a time frame set by the bank.
Expired Reward Points:
The reward points that you earn on your credit card through different transactions are not credited to your account for a lifetime but rather come with an expiry date. Hence, if you do not use a credit card for a long period of time, chances are high that you might forget about the points earned and ultimately they would expire without you taking benefit of the reward points earned.
Affects your credit utilization ratio:
If you do not use a credit card for a long period of time, the credit card issuer might close your account. An inactive account will not affect your credit score but if your account is closed due to inactivity, it will surely bring down your credit score by a few points. The reason behind this is that you are losing a source of credit and this will, in turn, affect your credit utilization ratio, which plays a 30% role in determining your credit score.
Unpaid balances will keep on growing:
There might be some minute unpaid balances in your account that you might have missed paying. If you stop using your credit card, you will continue to miss such charges, and they will continue to attract charges towards them. These will be piled up to a very huge amount if not paid on time.
Fees:
A credit card comes with an annual fee and is charged to a credit card user every month. Now even if stop using a credit card, you will have to pay the annual charges that accrue on your credit card because you have just stopped using a credit card. You have not surrendered the credit card. And if you forget to pay the annual fee, it will keep accruing and will attract charges as well. Hence, it is very important to check your credit card statement and pay for any dues that appear in it so that they don’t pile up to a very huge amount later.
Suggested Read: 9 Things You Must Look For In Your Credit Card Statement
Ways to prevent yourself from facing such consequences
Now if you want that you should not be involved in all such charges that arise due to inactive credit cards, you can follow the below-mentioned ways in which you neither will have to bear charges and still your credit card will remain active.
- Use your credit card for paying a recurring charge. Like purchase a Netflix subscription and pay for it monthly. In this way, your card will be debited with the subscription amount and will remain active. Since you are using your card monthly, a credit card statement will be generated and you will be able to keep a track of the fraudulent activities as well.
- Use your credit card for making small purchases. We agree that you might have multiple credit cards from which you are earning better rewards and this is the reason that you have stopped using your credit card, but to save your card from getting, you can swipe your credit card for the smallest purchase, once in two months, just to keep your card active.
Reasons to keep using your credit card
- If you use your credit card regularly, you can keep a check on all the activities taking place through your account and you will easily be able to detect fraudulent activity, if, any, that has taken place through your account.
- Offers on credit cards keep on revising. You will be able to get to know about such offers and take advantage of them only if you are actively using your credit card.
- Not only the offers, but credit cards come with some added benefits as well such as accidental covers, insurance covers, etc. The benefits can be utilized only if you use your credit card.
- The reward points that you earn with your credit card come with an expiry date and will expire if not used within the deadline.
Bottom Line
If you do not use your credit card for a long period of time, your credit card will get deactivated. Deactivation of credit cards will lead to many unfavorable circ*mstances such as an increase in credit utilization ratio and a decline in credit score, expiry of reward points, and loss of other benefits as well. Hence, we should try not to get our credit cards deactivated but keep them active by using them for small purchases. Also, the deactivation of credit cards will lead to a loss in credit history as well. Hence, you should keep your credit cards active and if you feel like a particular credit card is of no use to you, then a credit card should be closed instead of deactivated and you should obtain a clearance certificate as well so that you don’t attract any charges related to that particular credit card in the future.
