Do you pay anything if you don't use your credit card?

The Credit Card Catch: Paying for What You Don’t Use

The allure of a credit card is undeniable: instant access to funds, rewards programs, and the ability to build credit. But what happens when life gets busy, you’re being financially prudent, or simply forget your card exists in the back of your wallet? Do you start racking up charges for not using it?

Thankfully, the days of hefty “inactivity fees” on credit cards are largely a thing of the past. Regulations have made it illegal for credit card companies to charge you simply for failing to swipe your card for a certain period. This is good news, as it eliminates a potentially frustrating and unfair cost.

However, don’t breathe a sigh of relief just yet. While you won’t be penalized for inactivity directly, there’s still one common fee to be aware of: the annual fee.

Annual fees are charged by some credit card companies regardless of whether you use the card or not. They’re essentially a membership fee for the benefits and perks the card offers. These fees can range from a modest $25 to hundreds of dollars per year, particularly for premium travel or rewards cards.

Think of it like a gym membership. You pay the monthly fee whether you actually hit the treadmill or not. Similarly, if your credit card has an annual fee, it’s due each year, even if your card remains untouched in your wallet.

So, how do you avoid paying for a dormant credit card?

• Know Your Card’s Terms: Carefully review the terms and conditions of your credit card agreement. Look specifically for information on annual fees and any other potential charges.
• Consider a No-Annual-Fee Card: If you’re not actively using a card and are paying an annual fee, consider switching to a credit card that doesn’t charge one. There are plenty of excellent options available.
• Contact Your Credit Card Company: If you’re considering canceling your card due to the annual fee, call your credit card issuer first. They may be willing to waive the fee, offer you a lower-fee card, or provide incentives to keep your account open.
• Close Unused Accounts Carefully: If you decide to cancel your credit card, be sure to follow the proper procedures. Pay off the balance, redeem any rewards, and formally close the account. Closing an account can slightly impact your credit score, so weigh the pros and cons carefully.
• Set a Reminder: If you have a card with an annual fee that you want to keep active, set a reminder to make a small purchase on the card every few months. This ensures the account remains active and you’re getting some value from it.

In conclusion, while inactivity fees are largely a thing of the past, the responsibility still falls on you to be aware of the terms and conditions of your credit card. Understanding the potential for annual fees and actively managing your accounts can save you money and prevent you from paying for something you aren’t using. So, before you file that credit card away, double-check for that pesky annual fee!