What happens if you have a credit card and don't use it?

The Consequences of Credit Card Inactivity: Implications for Credit History and Rewards

In the realm of personal finance, credit cards play a significant role in shaping one’s financial standing. However, what happens when a credit card goes unused, gathering dust in a drawer? While it may seem harmless, neglecting to use a credit card has certain implications that merit consideration.

Loss of Rewards and Points:

Many credit cards offer enticing rewards and points systems that accumulate with each purchase. These rewards can range from cash back and travel miles to merchandise and exclusive perks. If a credit card remains unused, the cardholder misses out on these valuable opportunities to earn valuable rewards.

Stalled Credit History Development:

Using a credit card responsibly contributes to the development of a robust credit history. Each transaction, payment, and balance management practice serves as a data point that lenders use to assess a borrower’s creditworthiness. When a credit card is unused, there is no new data added to the credit history, which can hinder its growth.

Negative Impact on Credit Utilization Ratio:

Credit utilization ratio, which measures the amount of available credit being used, is a key factor in credit scoring. Leaving a credit card balance unchecked can increase the credit utilization ratio, which can negatively impact a credit score. Conversely, using and paying off a credit card balance on time can help keep the credit utilization ratio low.

Potential Fees and Charges:

Some credit cards have annual fees or inactivity fees that can be charged if the card is not used within a certain period. While these fees are typically minimal, they can gradually add up and further diminish the benefits of having an unused credit card.

Other Considerations:

In addition to these direct consequences, unused credit cards can also create a psychological disconnect from responsible credit management. When a card is not actively used, it becomes easier to ignore bills or make late payments, which can damage a credit score.

Conclusion:

While leaving a credit card unused may seem harmless, it forgoes the advantages of responsible credit management. Unused credit cards offer no rewards, potentially hinder credit history development, and can lead to increased credit utilization ratios and fees. To maximize the benefits of credit card ownership, it is advisable to use the card regularly and pay off balances in full and on time.