Here’s What Happens If You Don’t Use a Credit Card for a Year or More

Many people have credit cards that they use almost daily. And if you use a credit card, you may find yourself using your card several times a week for purchases, like groceries or gas.

But there may come a time when you stop using one of your credit cards. Maybe because your other cards offer a better rewards program. Or maybe you’re deliberately trying to pay more expenses in cash.

You should be aware that not using a credit card can result in it being canceled, which could negatively impact your credit score.

Will an unused credit card be cancelled after 12 months?

It’s quite common for credit card companies to cancel cards due to inactivity. The time frame for this to happen can vary depending on the card, so you’ll need to check your credit card agreement to see what you’re dealing with.

However, it is not uncommon for a credit card to be canceled if it has not been used for 12 consecutive months. And worse, your credit card company may decide to cancel your card without giving you prior notice of an impending cancellation.

The good news is that you can’t be charged a fee if you don’t use your credit card for a year or more. Inactivity fees were banned in 2010.

The problem with canceling a credit card

If you have a credit card that you haven’t used in a year or more, you’re unlikely to regret it if your issuer decides to cancel it. But it’s best to avoid that scenario for one key reason: A canceled card could lower your credit score.

One important factor that goes into calculating your credit score is your credit utilization ratio, which measures how much revolving credit you’re using at any given time. Keeping this ratio at 30% or lower could help your credit score improve or remain strong, while a higher ratio could hurt your score.

That’s where a canceled credit card comes in. Let’s say you have three credit cards with a total spending limit of $10,000 and you have a balance of $2,000. That puts you at 20% utilization, which isn’t a bad rate at all.

But what happens if one of those cards gets canceled due to inactivity and your total spending limit across all your cards suddenly drops to $6,000? Suddenly, you’re at 33% utilization, which isn’t as good for your credit score as 20%.

That’s why it’s best not to let a credit card sit unused for too long if it significantly increases your total spending limit. East It’s a good idea to cancel a credit card that has an annual fee and isn’t getting you much use out of it. But if the card doesn’t charge a fee and can help you use your credit better, it’s best to avoid canceling it.

An Easy Way to Avoid Credit Card Cancellation

One easy way to avoid a credit card cancellation due to inactivity is to set up a small recurring charge on that card, like a streaming service that costs less than $10 per month. That way, if the card’s rewards program leaves a lot to be desired, you won’t lose too much cash back by charging that small expense every month. At the same time, you’ll keep your account open without having to think about it.

Remember, not only can a higher credit limit improve your credit score, but you never know when you might need to pay a large expense with a credit card. Having access to credit is a good thing, so do your part to keep your cards active if they don’t cost you anything.