What happens to a credit card when you don't activate it?

Consequences of Failing to Activate a Credit Card

Failure to activate a credit card after receiving it can lead to several unfavorable consequences, affecting both your credit utilization and credit history.

Potential Closure of Inactive Accounts

Credit card issuers often set time limits for account activation, ranging from a few weeks to a few months. If a card remains inactive beyond this period, the issuer may flag it for closure. This process typically involves sending a notice to the cardholder, informing them of the intent to close the account if activation is not completed within a designated timeframe.

Closure of an inactive credit card can have negative impacts on your credit utilization and credit history.

Credit Utilization

Credit utilization refers to the amount of credit you are currently using compared to your total available credit. When a credit card is closed, the available credit limit associated with it is removed from your credit report. This reduction in available credit can increase your credit utilization ratio, which is a key factor in determining your credit score. A higher credit utilization ratio can lower your credit score, making it more difficult to qualify for loans and other financial products with favorable terms.

Credit History

An inactive credit card that is closed can also have a negative impact on your credit history. Open credit accounts contribute to the length of your credit history, which is another important factor considered in calculating your credit score. When a credit card is closed, the length of your credit history is shortened, which can negatively affect your score.

Steps to Avoid Closure

To prevent the closure of an inactive credit card, it is important to activate it promptly after receiving it. Typically, you can activate your card by:

• Calling the toll-free number listed on the card or accompanying materials
• Logging into the issuer’s website and following the online activation instructions

If you do not activate your card within the specified timeframe, you can contact the issuer and request an extension. They may be willing to grant you additional time to complete the activation process.

By activating your credit card promptly, you can avoid the potential negative consequences of having an inactive account closed and maintain a healthy credit profile.