To prevent the issuer from canceling your card, which could lower your credit score, make sure you use it frequently enough.
You took advantage of a fantastic introductory offer when you opened a credit card, but you stopped using it once you received the reward. What happens next?.
If you dont use your credit card, the card issuer may close your account. Additionally, if you don’t keep an eye on the inactive card, you’re more likely to fall victim to fraud, and fraudulent charges can harm your finances and credit score.
Even though nothing happens if you don’t use your credit card for a month, if you intend to keep it unused indefinitely, you should think about canceling the account.
The biggest risk of not using a card is that you might quit checking your statements as well. Failing to monitor your account might leave you in the dark about fraudulent activity. You might not notice a fraudulent charge until much later if the card is out of your sight.
“It’s not going to be nearly as likely that you stay up to date with everything,” says Chris Dlugozima, the learning experience designer at the nonprofit debt counseling service GreenPath Financial Wellness.
According to Linda Jacob, an accredited financial counselor with Consumer Credit of Des Moines, Iowa, and author of “No More Paycheck to Paycheck: Stop Living in Debt and Start Living the Dream,” the longer you ignore the card, the more detrimental fraudulent activity can become. “.
Hey there, fellow money enthusiasts! Ever wondered why some folks, like me, choose to live life without plastic? Well, buckle up, because we’re diving deep into the world of credit cards and exploring the reasons why I’ve ditched them since 2009.
Myth Busting: Credit Cards Aren’t Essential for Survival
Contrary to popular belief, credit cards aren’t a prerequisite for functioning in society. While 83% of people aged 30-49 own a credit card, and over half of US households carry credit card debt, I’m living proof that you can thrive without them.
My Reasons for Ditching Credit Cards:
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Simplicity Reigns Supreme: I’m a big fan of clean, straightforward systems, and credit cards add unnecessary complexity to my budgeting. By sticking to my checking account and using only “real” money, I have a clear picture of my spending and avoid the hassle of categorizing credit card payments.
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Shattering the Illusion of Wealth: No matter how financially savvy you are, credit cards can create the illusion of having more money than you actually do. That generous $10,000 credit limit can feel like an extra $10,000 to spend, even though it’s not real money. This illusion often leads people to underestimate their need for short-term savings, including an emergency fund.
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Reducing Overspending: Research indicates that individuals typically spend more money when utilizing credit cards as opposed to cash. Plastic creates a psychological gap that reduces the significance of purchases, which increases spending. Additionally, credit card companies cleverly use points and rewards to further incentivize spending.
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Profiting from the Vulnerable: The credit card industry, even if you use it responsibly, depends on taking advantage of people who have financial difficulties. The benefits you receive are obtained at the expense of those who overspend and become locked into cycles of high interest.
The Bottom Line: Weighing the Pros and Cons
Credit cards have certain benefits, such as rewards programs and fraud protection, but sometimes the drawbacks outweigh the advantages. I find that using just my debit card gives me much more simplicity, control, and peace of mind than any perceived benefits of credit cards.
Remember: This is my personal choice, and it’s not a judgment on anyone who uses credit cards responsibly. The key is to be mindful of your spending habits and choose the financial tools that best align with your values and goals.
Bonus Tip: For additional information on wealth management and personal finance, subscribe to Elevation Financial’s podcast and blog. They offer valuable resources to help you make informed decisions about your money.
So, there you have it! My reasons for ditching credit cards and embracing a simpler, more conscious approach to spending. Whether you choose to follow my lead or not, remember to be intentional with your financial choices and prioritize your long-term financial well-being.
The Danger of Having a Credit Card Closed
The other risk of leaving a card inactive is the issuer might decide to close the account.
If you havent used a card for a long period, it generally will not hurt your credit score. But, your credit may suffer if a lender decides to close the account after noticing your inactivity. This is because the percentage of your total available credit that you are using—your credit utilization ratio—can be impacted by the loss of a credit source.
Furthermore, closing a card that is among your oldest might shorten the duration of your credit history, which is what determines your 2015 FICO score. This may result in a decrease in your credit score and the average age of the accounts in your credit report.
One more effect of closing an account is that you might forfeit any rewards that you have accrued, like airline miles.
Read:
Do You Get Charged for Not Using a Credit Card?
In the past, if you didn’t use your credit card for a long time, issuers might have charged you inactivity fees. However, the Federal Reserve banned this practice in 2010.
Whether or not you use the card, you will be required to pay the annual fee if one exists.
Why I’ll Never Use a Credit Card
FAQ
Why you should not use a credit card?
What is one of the biggest dangers in using a credit card?
Is it a good idea to never get a credit card?
Why should you not use a credit card?
These are the same reasons why most Americans should not use credit cards: Risk of Debt. When used as a method of payment, credit cards deliver convenience, security, a record of your spending, and potentially valuable rewards (i.e. how to use a credit card and rewards wisely ).
Should you keep a credit card if you never use it?
Your overall credit utilization rate won’t go over 30%. There’s no clear incentive to keep the card (e.g, rewards, cash back, low interest rate). The incentive is the first thing to review. Consider why the card is never used and whether there’s enough reason to keep it open. Is there cash-back potential to be taken advantage of?
Why do people stop using credit cards?
As cardholders began to realize the true cost of credit cards, many began to make determined efforts to reduce or eliminate their credit cards altogether. There are many reasons why people cut up their credit cards, or forgo credit cards totally. These are the same reasons why most Americans should not use credit cards: Risk of Debt.
Should I get a credit card if I have too many bills?
If you make enough money to qualify for a credit card, but you already have too many bills, adding a credit card to your current obligations isn’t a great idea. Work on eliminating some of your bills and reducing your spending before you add a credit card to the mix. 6. You’re Not Financially Disciplined