What Happens if you Don't Use your Credit Card?

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  | Published: 15 August 2020 | Last Updated On: 28 December 2020

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Imagine marrying into a family of acrobats – you might not be expected to take part in all those high wire acts, but you would definitely be expected to practice your hand at balance. Same is how it is to manage credit cards. If you go to the extreme end and charge your credit card to the maximum and you will see your credit score suffer. At the same time, if you lead to the other end and hide your card away in a drawer for a long time, you might end up your card company cancelling it.

Like most of the balances activities, it is important to find the right safe spot in the mid.

The Risks Associated with Not Using Your Credit Card

You might have, at some point in life, been told that the best way you can get out of debt is to burry your credit cards away so that you no longer have access to it when you get that temptation to make those in the moment purchases. You might have also been told to cut up your credit card into small pieces, to make sure that you cannot use it again. If you are someone who regularly ends up charging more than the credit limit to your card, both of these options might sound appealing, especially if there is no annual fee charged on your card.

Credit card debt can be an awful thing and it is the wisest thing to avoid it entirely. However, if you do not show any activity on your card at all, you are at a risk of your card being cancelled by the provider. You might also be exposing yourself to the risk of credit card fraud as well as accidental missed payments.

The Providers Might Cancel Your Credit Cards

There is no for certain rule that states the time period that your credit card provider will allow you to go ahead and keep your card without any activity on it. They will not only figure out when it is the right time for it, but they also do not have any obligation in terms of law to provide you with any sort of notice. It is important for you to remember that even the credit card companies need to earn some money. If you, as a cardholder, do not spend anything on your credit card, they do not earn any sort of interest on it. Also, not using your credit cards also prohibits the company from charging any sort of merchant process fees that is applicable when you use your card.

If and when there comes a time when you face the cancellation of any of your credit cards, your credit score can be negatively impacted in two ways, they are:

  1. A closure will thereby reduce your credit history’s average length. This factor roughly makes up for almost 15% of your entire credit score, and the wisest way to plump this up is to have as many open accounts as possible.
  2. There could be an increase in your credit utilization ratio. This is the second most essential factor when determining one’s credit score. It measures the amount owed by you in relation to the available credit that is extended to you. To give you an example, consider having 3 credit cards, each has a spending limit of AED 5,000, giving you an available credit of AED 15,000 at hand, or roughly 33%. Now assume that you don’t owe anything to your 3 credit card because you do not use it and therefore, it gets cancelled. Now, you are only left with an available credit of AED 10,000 and your credit utilization ratio will now rise to 50%. The ultimate aim is to keep your credit utilization ratio as low as possible and cancelled credit cards do not support this.

You Might Overlook Credit Card Activity

Take a minute and ask yourself the chances of you actually going and checking the monthly statement that is attached to any of the credit cards that you are not using. If you answer falls somewhere on the line of “rare chances,” you might end up missing some fee and charges such as fraudulent charges.

If you are someone who has never faced any sort of fraud, you might not realize that those bad guys in some cases take your credit card details for something such as a test run by making a small purchase. If the charge on the card is not reported, they consider it as a green flag and go ahead to use it for larger purchases.

It is also pretty easy to miss out on any other charges that might show up in your monthly bill, and you might accidentally miss the payment. These can be for annual fees and irregular payment activities such as gym memberships, subscription services, etc.      Missed payments can lead to a drop in your credit score and can also cost you a late fee.

Make Your Credit Cards Work for You

The fact derived from this entire thread is that you have to use your credit card once in a while to keep it active and going. How often you should charge is depends on your own opinion and can vary for different people. To be on the safe end, try and charge minimal purchases on it, at least an item in one month. Even if it is just milk for your daily needs, the activity will reflect as a payment made on time and the company will consider the card to be active.

The best way one can maximize their credit card’s worth is by charging the much-needed expenditures, and gain from the rewards offered on it. Regardless of your current scenario, the option is not to stop using your card, instead, you need to start making it work in your favor.