What Happens If You Don't Use Your Credit Card?

Did you recently stumble across an old credit card in a drawer? Perhaps you opened a balance transfer or cashback card because of an introductory offer and didn't use the card after the first year. You may be asking, "What happens if you don't use your credit card?" 

Not using a card isn't the worst thing in the world — it's preferable to taking on high-interest credit card debt — but there are some things that you should be aware of if your card isn’t in use. We'll highlight those concerns and what you can do instead. 

What happens if you don't use your credit card? 

Having an unused credit card account may not cause direct harm to your personal finances or credit score. But if left unmonitored, some adverse things could occur. Below, let's take a closer look at what happens if you don't use your credit card. 

Your credit card company may charge annual fees

Some credit cards come with annual fees, typically charged once a year. Though it can vary between credit card issuers, rewards cards with perks like cash back or travel rewards are the ones most likely to come with an annual fee. But, if you aren’t using the card, you aren’t benefiting from the expense of holding the card. 

The annual fee is added to your credit card balance and, if not paid by the end of your billing cycle, will be added to your statement. You then have to pay off the annual fee before you’re charged interest until your due date. 

If you’re not using the card, you may be charged fees without realizing it. Depending on how long it takes you to notice your credit card bill, you may also be charged interest. If you miss a payment, you can be charged late fees and penalty interest rates. And a missed payment will show up on your credit report, negatively impacting your payment history. 

Fraudulent activity may take place on your account 

As long as an account is open, it’s vulnerable to fraudulent activity or identity theft. If you regularly use a card, you’re more likely to notice suspicious transactions. But if you’re not using or monitoring a credit card regularly, your account information could be stolen and your card could be used for months, if not years, before being caught. 

It can take upward of 200 hours over six months to undo identity theft. This could include time spent on the phone with the: 

• Credit card company

• Businesses who accepted the fraudulent transaction

• Three major credit bureaus (i.e., Equifax, Experian and TransUnion) 

• Police 

• Internal Revenue Service (IRS)

• Social Security Administration 

You can access your credit report for free via Annual Credit Report. This is something that you should be doing regularly anyway, but it’s especially important if you know you have open credit card accounts that aren’t in use. You should also review your credit card statements each month to flag fraudulent activity. 

Your credit card company may close the account 

If your lender notices account inactivity, the lender has the right to close the account. There’s no predefined length of time to dictate when this may occur, and it can vary from lender to lender and from individual to individual. The standard is 12 months, but the bottom line is that your issuing financial institution can close your credit account at their discretion when there is a period of inactivity. 

This will impact your credit score in a few ways. For one, it’ll show that you closed an account. Doing so reduces the average age of accounts on your credit report, impacting your credit. The longer the account had been open before closing, the greater the negative impact on your credit score. 

Second, closing an account reduces your total available credit. This, in turn, can impact your credit utilization ratio. Your credit utilization rate reflects the amount of credit that you’re using. 

For instance, let's say that you have three credit card accounts open:

• One with a credit limit of $5,000

• One with a credit limit of $3,000

• One with a credit limit of $2,000 

Your total available credit is $10,000. You carry balances of around $2,500 between the cards at any time, keeping your utilization rate below the industry-recommended 30%. 

Due to inactivity, your lender decides to close the account with a $3,000 limit. Now, your available credit is $7,000. This raises your utilization rate to about 35.7%, which may negatively impact your credit score. Lenders also can lower your credit limit instead of closing the account, which could potentially have the same impact on your utilization rate. 

​Can your lender assess fees if you don't use your card? 

No, there are no explicit fees that your credit card company can impose for not using a card, as The Federal Reserve banned this practice in 2010. 

Should you close your card if you're not using it? 

Perhaps you’ve recently found an old credit card or finally paid off the balance on a credit card that had you buried in debt. So you’re thinking about closing your credit card. But before you do, there are some things that you should think about first.

For starters, as we mentioned above, closing a credit card account can harm your credit report. So, depending on how long you’ve had the account open, you may want to think twice about closing it. This is especially the case if you’re trying to build credit or are preparing for a big purchase, like a new home. 

If you have an annual fee and you know you’re not going to be using the card, then you may want to consider closing it. Though, you may be able to negotiate with your lender first to keep the card open and waive the fee. 

Instead of closing a card, one strategy you may want to consider is treating the card like a debit card for small purchases that you’ve budgeted for. For instance, let's say that you fill up your car with gas once per week, averaging around $40. You typically pay for these expenses with cash or your debit card. You can put them on your credit card instead and pay off the balance in full by your due date. 

Utilizing this strategy can help establish a healthy credit history. By making on-time payments in full, it will keep you in good standing with your credit card company. And, because you are only using the card for small, manageable purchases that you can pay in full, you won't take on high-interest credit card debt. 

How can you see if you have any open accounts?

As mentioned previously, you are entitled to a free copy of your credit report each year. You can use your credit report to ensure the information it contains is accurate. Your report will show you the credit lines that are open under your name. This may remind you of credit card accounts you had forgotten about or alert you to accounts that have been fraudulently opened under your name.

Use your credit cards strategically  

When used correctly, credit cards can be useful tools. They can offer perks like cash back, which is essentially free money. They can also help you build credit. But, it’s important to understand what happens if you don't use your credit card. Not using a card leaves you susceptible to annual fee charges and subsequent penalties, identity theft, and sudden account closure. 

Before you can consider closing a credit card, you need to ensure that all of your debts are paid off. One way to do this is by utilizing Tally†. Tally is a credit card payoff app designed specifically to help you pay down your credit card debt quickly and efficiently with a lower-interest line of credit. Once your debt is paid off, you can determine how best to use the card going forward. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.