A tiny amount of utilization is better than no utilization for credit scores. By not using it at all you would be at risk of having the bank automatically close your card (they usually do this if there's no charges for 6-12 months). You definitely don't want to close the card as that's your oldest.
The other risk of leaving a card inactive is the issuer might decide to close the 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.
If you don't use a credit card for a year or more, the issuer may decide to close the account. In fact, inactivity is one of the most common reasons for account cancellations. When your account is idle, the card issuer makes no money from transaction fees paid by merchants or from interest if you carry a balance.
Even if you don't use a credit card, the card issuer may still continue to levy annual fees and charges. An inactive credit card could be deactivated by the card issuer. A credit card could be helpful for those who are looking forward to convenience of payment and often face cash crunch.
A crowded wallet and the temptation to spend might have you thinking about canceling unused credit card accounts. 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).
Account Closure Varies
While there are no hard and fast rules about how long a card can be open and not used before a company moves to close the dormant credit line, it can sometimes take as little as six months or as long as two or three years.
Your credit card could be closed due to inactivity
Credit card companies often review account activity and may close accounts that haven't been used for an extended period. If a company closes your credit card account due to inactivity, it may impact your credit score, according to FICO1.
Typically, leaving your credit card accounts open is the best option, even if you're not using them. However, there are a few valid reasons for deciding to close an account.
Your credit card account may be closed due to inactivity if you don't use it. You could overlook fraudulent charges if you're not regularly reviewing your account. If your credit card account is closed, it could negatively impact your credit score.
Keeping a low credit utilization ratio is good, but having too many credit cards with zero balance may negatively impact your credit score. If your credit cards have zero balance for several years due to inactivity, your credit card issuer might stop sending account updates to credit bureaus.
A 700 credit score is considered a good score on the most common credit score range, which runs from 300 to 850. How does your score compare with others? You're within the good credit score range, which runs from 690 to 719.
While you don't want to carry any balance, make sure you're still using your credit card regularly — at least on small charges. Otherwise, your credit card issuer can potentially close your account after months or years of inactivity.
Your credit needs may change over time. Keeping an unused card open allows you to access credit quickly without applying to get a new card. It also helps you avoid a hard inquiry, which can temporarily lower your credit score.
Millionaires are more likely to have a credit card from nearly every major issuer than less wealthy Americans, with Capital One being the only exception. This is likely due to rich Americans simply having more credit cards than the average American.
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Closing a credit card with a zero balance may increase your credit utilization ratio and potentially drop your credit score. In certain scenarios, it may make sense to keep open a credit card with no balance. Other times, it may be better to close the credit card for your financial well-being.
Key takeaways
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.
Closing a credit card can hurt your credit, especially if it's a card you've had for years. An account closure can cause a temporary hit to your credit by increasing your credit utilization, lowering your average age of accounts and possibly limiting your credit mix.
If you close a credit card with a balance, you'll still be responsible for paying the remaining balance, any interest incurred and any monthly or annual fees.
It depends on the company. Accounts may be deemed inactive if there aren't any new purchases on the card for a certain period of time. You may want to consider speaking with the credit card company with whom you have an account to learn more about its policies on account inactivity.
If you only pay the minimum due on your credit card, the remaining balance may accrue interest and increase your credit utilization, which could negatively affect your credit scores and make it harder to get out of debt.
If you stop using your credit card for new purchases, your card issuer can close or curb your credit line and impact your credit score. Your credit card may be closed or restricted for inactivity, both of which can hurt your credit score.