Credit Card: Not using your credit card for long? Should you close it or continue? (2024)

FAQs

Credit Card: Not using your credit card for long? Should you close it or continue? ›

The bottom line

In most cases, however, it's best to keep unused credit cards open so you benefit from longer credit history and lower credit utilization (as a result of more available credit). You can use the card for occasional small purchases or recurring payments to keep it active as opposed to using it regularly.

When possible, avoid closing your credit cards and look for alternative options to reign in your spending. If you are trying to save on interest, consider a balance transfer or 0% APR credit card. “In general, it's a good idea to keep all of your credit cards open, even if you aren't using them,” advises Tayne.

If you don't use your card, your credit card issuer may lower your credit limit or close your account due to inactivity. Closing a credit card account can affect your credit scores by decreasing your available credit and increasing your credit utilization ratio.

Protect the card or cards you still have open. Use each card at least every few months to keep the account active.

Maintaining a longer credit history demonstrates to lenders that you have more experience managing credit and are, therefore, less of a risk. Closing older accounts can lead to a score drop, especially if you decide to close the card you've had the longest.

Before you run out and charge something just to keep your account active, however, you should know that it usually takes a year or more of inactivity for the issuer to close the card. It's also important to note that you might not get any warning that your issuer is closing your account.

If you haven't used a card for a long period, it generally will not hurt your credit score. However, if a lender notices your inactivity and decides to close the account, it can cause your score to slip.

Your credit utilization ratio goes up

By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.

In general, you should use your credit card at least once a quarter (every three months) to keep the card open and active. The answer to just how often you should use your card to maintain a good score comes down to your credit utilization and on-time balance payments, rather than how many transactions you have.

How soon is too soon to close a credit card? ›

“At a bare minimum, wait until the card anniversary since the first year's annual fee is a sunk cost at this point anyway,” he says. “At that point, usually you can negotiate your way out of one or two annual fees, or they may credit you with an additional reward if you pay the fee.”

Inactivity. Your issuer may decide to close your account after seeing that it hasn't been used for a certain period of time (a few consecutive months, for example). Generally, if your account was closed due to inactivity, you may be able to reopen it.

However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.

There are times when canceling a credit card can be the right call. However, closing a credit card can hurt your credit, especially if it's one of your oldest accounts and it's in good standing (meaning you're making payments on time and as agreed).

Your credit utilization ratio goes up

By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.

While there are instances where the benefits outweigh the costs, it's common to find yourself paying an annual fee and not using the benefits. In these cases, it may be best to close the card. Before you do, call your credit card provider and talk about the fees.

If you've had your card for less than a year, closing it reduces the length of your credit history and has the potential to increase your credit utilization ratio — both of which can negatively affect your credit score.