Managing a credit card is a little like marrying into a family of acrobats: Sure, you don't have to take part in the high-wire act, but your balance will be tested. Over-using your credit card is bad, but so is under-using it. The trick is sticking to the middle ground so your finances don't go splat.
In other words, credit card debt is awful and it's smart to avoid it. But not using your credit cards at all has consequences you should consider before sentencing your cards to a life under lock and key. Here are two things that could happen if you don't use your credit card.
1. Your card could be canceled
Credit card companies make money from credit cards in a number of ways, including annual fees, interest fees, and late fees. But the number one source of income for card issuers is the processing fees they charge merchants every time you swipe.
Unused credit cards don't make any money -- and an open credit card account costs money to maintain and monitor. Rather than pay for you to not use your card, the card issuer may simply cancel your unused credit card and close the account.
There is no hard-and-fast rule for how long your issuer will allow you to keep your unused credit card on ice. Nor are credit issuers required by law to give you notice before closing your account.
It may seem like no big deal if the issuer cancels a card you aren't using anyway, but a canceled card can hurt your credit score in a handful of ways:
- Your credit utilization ratio could increase. This is the second most important factor in calculating your credit score. It measures the amount you owe in relation to your available credit. To illustrate, imagine the following: You have three credit cards. Each has a credit limit of $5,000, giving you $15,000 in total available credit. You owe $2,500 on two of the cards, which means you're using $5,000 of your available $15,000, or 33% of your limit.You owe nothing on the third credit card. But because you don't use it, it gets canceled. That drops your credit limit to only $10,000 so your total credit utilization jumps to 50%! The higher your credit utilization, the worse your credit score.
- Your credit card account will stop aging. An important factor in your credit score is the length of your credit history. This includes both the age of your oldest account and the average age of all of your accounts. A canceled credit account won't drop off your credit report immediately, but that account does stop aging. This could slow the speed at which your credit score increases, especially if the canceled card is one of your older accounts.
- Your account mix could shrink. Credit bureaus like to see a healthy mix of account types. It indicates you can manage multiple credit lines with no problem, including credit cards, car loans, and personal loans. Removing a loan type from the mix could hurt your credit score a bit.
Although issuers don't always cancel an unused credit card, it's a common practice. Unless you're sure the closed card won't cause a problem, consider swiping your credit card every few months to keep the account active and your payment history fresh.
2. You could overlook card activity
At the same time you're asking yourself, "What happens if I don't use my credit card?" consider the question: "What's going on with my unused credit card while I'm not looking?" If you're not using a credit card, you may not be regularly logging into your account. This opens the door to credit card fraudsters.
There were 1,686,121 reported cases of identity theft in the U.S. in 2021, and 23% of those cases involved credit card fraud. If you've never been a victim of fraud, you may not realize that the bad guys sometimes take your credit card number for a "test run" by purchasing something small. If you don't report the crime, they know it's safe to make larger purchases.
It's also easy to miss recurring charges and accidentally miss a payment. These include annual credit card fees, subscription services, and gym memberships. Missed payments cost you late fees and harm your credit score. So, even if you're not regularly using your cards, be sure to keep an eye on your statements.
Make your card work for you
The fact of the matter is, you typically have to use a credit card on occasion to keep it alive. How often you should pull it out is a matter of opinion, but making at least a small purchase every few months can keep an otherwise unused credit card account from being closed. It will also remind you to check your statements, helping you spot fraud or unexpected recurring charges.
The best way to use a credit card is to build credit, earn rewards, and pay off monthly balances completely. Swipe occasionally to keep your finances from tipping one bad way or another -- make that tightrope work for you, not against you.
Still have questions?
Here are some other questions we've answered:
- How to Get Your First Credit Card
- What Is a Credit Card?
- How to Choose a Credit Card: 4 Steps to Picking the Right Card
FAQs
Possibly. If you don't use a credit card for a few months, your credit issuer may cancel your account. This could drop your credit utilization ratio, keep your account from aging, or reduce your account mix. Any one of these things could hurt your credit score.
Every two or three months at least. There's no exact rule for how long you can go card-free without getting your card canceled, but generally, it takes more than a month for issuers to take issue with no card usage.
