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Credit cards and debit cards both are means to reduce human effort. However, a widespread belief is that credit card users mostly end in debt. That belief is wrong. A credit card can be fruitful than a debit card. But, there are specific strategies that you need to employ while using a credit card. Because the terms and policies of using a credit card are comparatively different from debit cards, using credit can keep our transactions at a minimum. Now the question arises what happens if I don’t use my credit card? The short answer is nothing is likely to happen if you do not use your credit card for a few months as long as you make bill payments for any recurring monthly charges. Even the credit card’s issuer might opt to close your account after having an extended length of inactivity. You will also lose any advantages you have yet to redeem when your account has been shut.
There are many reasons why to use credit cards?
- Cash Back
- Rewards Point
- Universal Acceptance
- Building Credit
So, you don’t have any reason not to use a credit card. But, the situation sometimes demands attention as many queries arise along with using a credit card. One of the most common complications is what happens if I don’t use my credit card? Therefore if you have got complications that we have the desired answers for you. Just read the whole article, and you will find out what happens if you don’t use your credit card.
Drawbacks of Not Using a Credit Card
Not using the credit card might seem harmless; in fact, you will think that not using the credit card will save you from credit card debt and will enhance your interest rates. But, the situation is not the same; there are many drawbacks to using a credit card.
- Not using a credit card for a long time can lead to the cancelation of your card.
- The card can stop working in an emergency, which means that you have no more extended access to your credit card.
- Your credit score will also be affected.
You need to use your credit card consistently and maintain a credit because a credit card with 0 balances will get reported to the credit bureaus authority as being in good standing every month, with an on-time payment and 0% credit utilization.
Credit Using Affect
- The quantity of money you possess against the ready cash on credit is referred to as credit usage. Divide the amount you spent on your card by the entire credit line to get your credit use; in this case, your credit utilization is 10% ($1,000 spent divided by $10,000 credit limit). For example, let’s say you’ve spent $500 on each card. As a result, your total credit use is $1,000 split by $10,000, or ten percent.
- However, if you have many credit cards and one of them is nearing its credit limit, cancelling any of them will affect your credit usage ratio. If one of your credit cards is closed, your credit utilization reduces to 20% immediately. When it pertains to your credit score, though, it may be wiser to leave an unused credit card active rather than cancel it.
Cancelation of Unused Card
- Sometimes, we think that not using a credit card is beneficial. Because we are safe from the debit issue of the credit card and interest rate also increases. But the scenario is not the same at all; most of the credit card providers do not charge the inactive account fee on the unused credit card. Therefore, the issuer starts losing money on our dormant account. Hence, the credit card issuer decides to close our credit card.
- In most cases, an unused card remains open for a year, so it is then closed by the issuer.
Many factors influence a credit score. Some of these factors are
- How much you use your credit card. Yes, using credit cards enhances the credit score.
- The better your payment history will show better your credit score.
- Using a small amount of credit helps in credit utilization. Credit experts recommend using below 30% of your credit limit, and it’s even better to stay under 10%.
- Using more than one credit card than using one of them is essential. Some people, for the sake of reward points, let other cards dormant. This will result in the cancelation of other cards.
- So, a credit score depends upon the usage of a credit card and payment history. Therefore if you stop using the credit card, this will let the issuer close your credit card.
If you are not overlooking the credit card, you should question what is going on with my unused card? Because not using a credit card for some time will open the doors of credit fraud.
- There were 650,572 most reported cases of identity theft in the U.S. in 2019, and 41.8% are those involved in credit card fraud cases. Therefore these cases not reported now will enhance the crime further.
- So, you need to look upon your card activity regularly to deal with this problem. Otherwise, you can be the next victim of the fraud. The best way to treat this problem is by continuously checking the payment history and credit score.
Prevention from closing Credit card
- You need to own some prevention to keep your card safe from closing. But, you will need to implement them all;
- You can make a reminder calendar to not miss out on any of the payments.
- You can put a small recurring charge so that it will not affect your credit score.
- Replace the unused credit card with a new one, and then you can close the unused card.
- Keep an eye on the payment activity to keep yourself safe from credit fraud.
What happens if I don t use my Credit Card: FAQ’s
Do unused credit cards hurt your score?
Not using a credit card can increase the interest rate and secure you from high debits. But, an unused credit card also hurts the credit score. Because credit score depends on credit cards and payment history, not using the credit card can disturb the credit score.
Will my credit score go up if I don’t use my credit card?
The credit card score will never go up if not using the credit card because credit score depends on credit card usage and payment history. So, your credit score will undoubtedly get hurt if you do not use your credit card for a while.
Will I be charged if I don’t use my credit card?
Usually, Credit card issuers do not charge inactive account fees; therefore, you will not be charged for not using your credit card. However, unused credit cards might stay open for a year or so.
Is it wrong to have a lot of credit cards with zero balance?
Keeping the credit card with zero balance will lower the utilization rate. Simultaneously, if the cards are kept with zero balance, the issuer will close your accounts. Which will adversely affect and your credit cards are going to be canceled. So, if you have a lot of credit cards with zero balance, then they are in danger of getting closed by your credit card issuers.
Do I have to use my credit card every month?
There is no must rule to use a credit card every month to maintain credit; however, if you do not use your card for some time, your card will be closed by the credit card issuer. The time limit of an unused card is somewhere between 12 to 24 months.
Is it better to close a credit card or leave it open with a zero balance?
Keeping an open account with a zero balance is better than closing a credit card. That is because closing a credit card will disturb the utilization rate along with the credit score. So, it is better to keep an open credit card with zero balance.
Why did my credit score go down when I paid off a credit card?
The credit which you are currently using is called credit utilization. Therefore credit card debt, when paid off, usually let the credit score go down. The credit also goes down when you close your account.
Do credit card companies like it when you pay in full?
Credit card companies like you to pay in interest because this increases the credit card company profits. When you start to pay in full each month, the credit card company does not make enough money. If you pay money in full, then you are just a deadbeat for the credit card companies.
To conclude this topic, what happens if I don’t use my credit card? That query was disturbing you for a while. I hope you will understand that although unused cards have some benefits, new cards have a lot of drawbacks. So, it is better to keep your card in use. Otherwise, your credit card will have to face cancelation. Unused credit cards can also be led to fraud. So, keep an eye on the credit score and look after the payment history to secure your account. Follow the preventions mentioned above to deal with the situation appropriately.
I am Lavinia by name, and a financial expert with a degree in finance from the University of Chicago. In my blog, I help people to educate by making wise choices regarding personal investment, basic banking, credit and debit card, business education, real estate, insurance, expenditures, etc.