What happens if you have a credit card but never use it?

The Consequences of Credit Card Inactivity

Credit cards are a convenient financial tool, but neglecting to use them can have detrimental consequences. Here's what you need to know about the risks associated with having an inactive credit card:

Account Closure

Credit card issuers typically close accounts that have been inactive for an extended period, usually over a year. This closure can have a negative impact on your credit utilization ratio, which is a key factor used to determine your credit score.

Credit Utilization Impact

Credit utilization, the percentage of your total available credit that you're using, is a major component of your credit score. When a credit card is closed, the available credit limit on that card is removed from the equation. This can lead to an increase in your credit utilization ratio, which can hurt your score.

Credit Score Damage

A higher credit utilization ratio indicates to lenders that you may be overextending yourself financially. This can lower your credit score, making it more difficult to qualify for loans or credit cards in the future, as well as potentially increasing interest rates on existing accounts.

Maintaining Credit Card Activity

To avoid these negative consequences, it's important to maintain regular activity on your credit cards. This can include making small purchases or even setting up automatic payments for recurring expenses. Even using the card once a year can keep the account active and prevent it from being closed.

Benefits of Active Credit Card Use

In addition to preventing account closure and credit score damage, active credit card use can also provide other benefits, such as:

• Earning rewards points or cash back
• Building a positive payment history
• Demonstrating responsible credit management

Conclusion

While having a credit card you don't use may seem harmless, it can lead to serious consequences for your credit score. By regularly using your credit cards, even for small purchases, you can maintain their activity, protect your credit utilization ratio, and keep your credit score in good standing.