Is it OK to have a credit card and never use it?

The Sleeping Giant: Why Leaving Your Credit Card Unused Hurts Your Credit Score

In the world of personal finance, the humble credit card often plays a more significant role than many realize. It’s more than just a convenient payment method; it’s a crucial tool for building and maintaining a healthy credit score, the invisible key to unlocking various financial opportunities, from favorable loan interest rates to apartment rentals. So, is it okay to have a credit card and never use it? The simple answer is: no. Leaving your credit card untouched can significantly damage your creditworthiness, hindering your financial future in unforeseen ways.

The primary reason why an unused credit card is detrimental is its impact on your credit utilization ratio. This ratio, calculated by dividing your total credit card debt by your total available credit, is a major factor in your credit score. While carrying a high balance negatively affects this ratio, having zero utilization can be equally problematic. Lenders see an unused card as a sign of inactivity, raising questions about your creditworthiness. They might interpret this as a lack of responsible credit management, even if you have other accounts in good standing.

Furthermore, many credit card issuers have policies that lead to inactive accounts being closed after a period of non-use. This closure immediately removes the positive payment history associated with that card from your credit report. Each credit account, with its responsible payment record, contributes to the length of your credit history – a critical component of your credit score. Losing an account, even if it was never used, shortens your credit history, potentially lowering your score.

This isn’t to say you should rack up debt on your credit card. Responsible credit card usage involves making purchases you can comfortably afford and paying your balance in full and on time each month. However, simply owning the card and using it sparingly, for small, regular purchases and immediately paying them off, can significantly benefit your credit score. A small, recurring charge like a subscription service or a monthly utility bill paid via your credit card can maintain activity and prevent the account from being closed.

The key is finding a balance. Avoid excessive spending, stick to your budget, and use your credit card strategically to showcase responsible credit behavior. Regular, small, and promptly paid transactions can effectively keep your credit card active and working in your favor, preventing the damaging consequences of inactivity. Don’t let your credit card become a financial sleeping giant; wake it up with responsible use and watch your credit score soar. Consult with a financial advisor if you need further guidance on managing your credit effectively.