Depending on the issuer, your credit card could be closed after just three months of inactivity.
Your credit utilization ratio may suffer a great deal if your credit card issuer cancels your account for no use.
You are undoubtedly aware of the significance of using your credit card responsibly and making on-time monthly payments. But an important factor you may be overlooking is how often you use your credit card.
In fact, if you dont use your credit card often enough, your account could be closed. It’s advised that you use your credit card at least once every three to six months, though the optimal frequency of use varies depending on the issuer. Heres why.
Yo, credit card peeps! Ever wondered how often you gotta whip out your plastic to keep it from going kaput? Well, buckle up, because I’m about to spill the beans on this credit card mystery
The short answer: It depends on the issuer, but generally using your card at least once every few months is a good rule of thumb. Even a small purchase like a cup of joe or a bag of chips will do the trick.
Why does this matter, you ask? Well, credit card companies, like any business, want to see that their cards are being used It shows them that you’re a responsible cardholder and that you’re interested in keeping your account active. This can help you avoid getting your card deactivated or even closed, which can be a major hassle
But wait, there’s more! Using your card regularly can also help you build a good credit history. When you use your card responsibly and pay your bills on time, it shows lenders that you’re a reliable borrower. This can lead to better interest rates and terms on future loans, which can save you a ton of cash in the long run.
Now, let’s get down to the nitty-gritty. Some credit card issuers have specific rules about how often you need to use your card to keep it active. You can usually find this information in the terms and conditions of your card agreement. But even if your issuer doesn’t have a specific rule, it’s still a good idea to use your card at least once every few months.
Here’s a quick rundown of the benefits of using your credit card regularly:
- Keeps your card active: This is the main reason to use your card regularly. If you don’t use your card for a long period of time, the issuer may deactivate or even close your account.
- Builds your credit history: Using your card responsibly and paying your bills on time can help you build a good credit score. This can lead to better interest rates and terms on future loans.
- Earns rewards: Many credit cards offer rewards programs that give you points, miles, or cash back for every dollar you spend. Using your card regularly can help you rack up these rewards and get more bang for your buck.
- Provides purchase protection: Most credit cards offer purchase protection that can help you get your money back if you buy something that is damaged or stolen.
So, there you have it! Using your credit card regularly is a good way to keep it active, build your credit history, and earn rewards. Just be sure to use your card responsibly and pay your bills on time to avoid getting into debt.
Remember, folks, using your credit card is like riding a bike. The more you do it, the better you get at it!
How a Closed Account Affects Your Credit
In addition to the inconvenience of having your account abruptly closed, there might be detrimental effects on your credit. How impactful an account closure is depends on your credit profile.
One of the most significant repercussions of closing your credit card account is how it affects your credit utilization, which accounts for 30% of your credit score and measures how much credit you use relative to the total amount of credit available to you.
Let’s take an example where you have a credit card with a $1,000 limit and a $500 balance, and another credit card with a $2,000 limit and no balance. In this case, your credit utilization would be nearly 17 percent ($500/$3,000). In the event that your $2,000 limit card were closed for non-use, however, your utilization would increase to 50% ($500/$1,000). Generally, experts recommend keeping your utilization under 30 percent; otherwise, it could negatively impact your credit score.
Another way your credit could be affected is by decreasing your total number of accounts. This probably wouldn’t be an issue if you had a short credit history or few credit accounts.
Finally, your variety of credit could also be impacted. Once more, this would be more detrimental to your credit than if you had a lengthy credit history and a variety of accounts to your name if you had few accounts and few other credit cards.
Read:
What Happens When Your Credit Card Becomes Inactive
The question of why credit card issuers care about how frequently you use your card boils down to financial considerations.
Charging merchants a small percentage of each transaction you make through your card is one way credit card companies generate revenue. If you don’t pay off the entire balance on your card, card companies charge interest in addition to these processing fees. The credit card company cannot collect any of these fees if you do not use your card or if you do not have a balance. Meanwhile, youre costing it money to maintain your account.
Credit card companies have only a limited amount of credit they can extend among all of their customers. In the past, card issuers could charge inactivity fees to make up the cost of servicing idle accounts. However, the Credit CARD Act of 2009 put an end to that practice. Closing inactive accounts and granting credit to customers who are more likely to use it is in the issuers’ best interests.
When closing inactive accounts, credit card issuers are not required to give notice, even though they must when making significant changes to your account, like raising the interest rate. Usually, they can close your account without warning and will only provide notice after the fact. Generally speaking, though, your card issuer will send you a warning and allow you to continue using your card because it would rather maintain the good standing of an existing account than close it and find a new one.
There are some exceptions. For example, credit card companies in California have to give 30 days’ notice before canceling an inactive account. States have different laws pertaining to this practice, so you may want to look into the regulations in your area.
How Often Should You Use Credit Cards to Keep Them Active?
FAQ
How long will a credit card stay active without use?
Do I need to keep using credit card to keep it active?
How much do you need to spend on a credit card to keep it active?
How many times should I use my credit card per month?
How often should I use my credit card?
You probably know the importance of using your credit card within responsible limits and paying the bill on time every month. But an important factor you may be overlooking is how often you use your credit card. In fact, if you don’t use your credit card often enough, your account could be closed.
Should you keep your credit card active for a long time?
It’s common for store-branded cards, for instance, to allow longer periods of inactivity since you might not shop at a particular retailer as often as you’d use a general purpose card. Maintaining some activity on your credit card can not only keep your account open, but you also remain a good customer.
How long can you keep a credit card?
First, it’s important to understand that you can keep your credit card indefinitely if you really want to. As long as you’re using the card regularly and keeping your account in good standing, your issuer probably won’t close it for you. If you like your card and want to keep using it, go right ahead.
How often should a credit card be inactive?
However, if you want to be extra safe, aim for every three. Some card issuers will explicitly state in the card agreement what length of time is considered to be inactive. However, keep in mind that if you’re carrying a balance on the account, you could keep it active simply by continuing to make payments.