What Happens When You Don’t Use Your Credit Card

August 26, 2024 By: Stephanie H. - CreditMonarch Online Writer0 comments

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If you’re one of the millions of Americans who want to improve your credit score, you might think that not utilizing your credit card will be beneficial. Many people’s credit score is negatively impacted when they accumulate too much credit card debt. However, you may be surprised to learn of the potential negative consequences that can happen if you don’t use your credit card.

The worst outcome if you never use a credit card is that your issuer may close your account, resulting in a dip in your credit score. Many credit card companies will close an account if there isn’t regular purchasing activity, which is not uncommon. This can hurt your credit score in a couple ways. First way, it will shorten your credit history by decreasing your credit “age”. Second way, it will increase your credit utilization rate as your available credit decreases. Third way, it will minimize your credit mix, especially if you don’t have many credit cards.

Many credit cards give you benefits or rewards like cashback, airplane miles, points, and more. Not only will you lose the ability to earn additional rewards when you stop using your card, but not using your card may cause the rewards you have earned to expire. Cashing out your rewards can help you avoid losing any if you plan on restricting your credit card usage. Your card may be charged an annual subscription or other infrequent charges if you’re not using it regularly. The accumulation of these balances will result in interest accruing, resulting in a higher credit card debt and a negative impact on your payment history, resulting in a lower credit score. If your credit card is inactive for a long period, your credit limit may be reduced by your credit card company. By increasing your credit utilization rate, this can negatively impact your credit score, which is not what creditors are looking for.

Credit card inactivity happens when you refrain from making any purchases with your credit card for a specific period. This time period is determined by the credit card issuer, with some having a duration of as little as six months and others lasting a year or more. Before you discontinue using a credit card, consult the terms and conditions to understand how your credit card issuer perceives credit card inactivity and their process for closing inactive accounts. Having credit cards and utilizing them responsibly can help your credit score in the long run, check out our list of recommended credit cards below.

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