Why is it bad to not use your credit card?

The Perils of Credit Card Inactivity: Why Regular Use is Essential

Credit cards are a ubiquitous part of modern finance, offering convenience, rewards, and access to credit. However, many cardholders may not realize the importance of regular credit card use to their financial health. Inactivity can lead to a series of negative consequences, jeopardizing both your credit score and overall monetary well-being.

Account Closure by Issuer

Credit card issuers regularly monitor account activity to assess cardholders’ financial status and creditworthiness. If a credit card remains dormant for an extended period, the issuer may interpret this inactivity as a sign that you are no longer interested in using the card or that you have fallen behind on payments. As a result, they may decide to close the account.

Account closure can adversely affect your credit utilization ratio, which measures the amount of available credit you are using. A high credit utilization ratio can damage your credit score, making it more challenging to qualify for loans and other forms of credit in the future.

Undetected Fraudulent Charges

When a credit card is inactive, it becomes more susceptible to fraudulent charges. Criminals may attempt to use stolen card numbers to make unauthorized purchases, and without regular account activity, you may not notice the fraudulent transactions until after the damage is done.

These undetected fraudulent charges can significantly harm your credit score. If the fraudulent transactions remain unpaid, they may lead to late payments or defaults, which can negatively impact your credit history. Additionally, fraudulent charges can result in financial losses, leaving you out of pocket for unauthorized purchases.

Maintaining Positive Credit History

Regular credit card use is essential for maintaining a positive credit history. When you use your credit card responsibly, making timely payments and keeping your credit utilization ratio low, you demonstrate to lenders that you are a reliable borrower. This positive payment history helps to build a strong credit score, which can open doors to lower interest rates, better credit terms, and access to higher credit limits.

Financial Well-Being

Inactivity not only impacts your credit score but also your overall financial well-being. By regularly using your credit card, you can earn rewards and cash back, which can offset the cost of purchases and provide additional savings. Additionally, credit cards can offer protection against unauthorized charges and purchase disputes, providing peace of mind and financial security.

Conclusion

Maintaining regular credit card activity is crucial for your financial health. Inactivity risks account closure by the issuer, leaving you vulnerable to undetected fraudulent charges that can negatively impact your credit score and overall monetary well-being. By using your credit card responsibly and monitoring your account activity, you can protect your credit, earn rewards, and enjoy the benefits that credit cards offer.