Unused Credit Card: How Long Can You Keep It? Will It Impact Your Credit Score? Explained

A credit card is a credit facility offered by a bank or credit card providers that comes with a pre-approved credit limit. You can buy things, do online transactions and repay the money with interest each month. You might not use your credit card for a long time for any number of reasons. 

 

You may wonder what would happen if you stopped using your credit card. You could also wonder what impact an unused credit card has on your credit score. Continue reading to find out what happens when you have an unused credit card and the ways to keep your credit card account active.

 

A credit card becomes inactive when you don't use it for a prolonged period. The provider company deactivates the credit card when the duration crosses a specific period. Some issuers deactivate the credit card after six months of dormancy while some do it after 12 months. 

In an instance where credit card has not been used for a period of more than one year, the process to close the card must be initiated after intimating the cardholder. 

If no reply is received from the cardholder within a period of 30 days, the card account will be closed by the card-issuer, subject to payment of all dues by the cardholder.

In addition to financial transactions, any process initiated by the cardholder such as generation of statement, change of PIN, change in transaction controls, etc., shall be considered for treating a card as ‘used’. However, any calls made to the customer care centre, for reasons other than those cited above, shall not be considered towards usage of a card.

Your credit card issuer may lower your credit limit or shut your account for inactivity if you don't use it for a long time. These actions could have an impact on your credit ratings.

If you want to keep your credit card active, you can use it to make small purchases and pay off the balance each month. Consistent payment activity is reported to the credit agencies each month. And that can help raise your credit scores.

Unused credit cards can have a positive impact on your credit score as long as the cards are active. An unused credit card improves your credit utilisation ratio (CUR). Your CUR is the amount of credit you use compared to your total available credit. The CUR significantly impacts your credit score. By keeping unused credit cards active, you maintain a higher total credit limit, which can lower your CUR as long as you maintain low balances on your other cards. A lower CUR generally leads to a higher credit score.

Whether or not to cancel unused credit cards is up to the user. You might want to think twice before closing a credit card account because it can lower your credit rating and limit your credit availability.