Inactive Credit Card: Use it or Lose it?

You may not have given much thought to the credit card in the back of your wallet or in a drawer – the one that was paid off and that you haven’t used in a while.

But after a certain period of time, which varies depending on the lender or creditor’s policies, they may consider your account “inactive” and it may be closed.

Remember that when it comes to credit, it’s important to show that you can handle financial commitments responsibly. A part of that is being able to use credit cards responsibly by paying them off regularly, on time, every time.

If you weren’t using the credit card, will the cancellation impact you at all? That depends on several factors, but here are some of the things you should know about account inactivity.  

How long can my account be inactive before its closed?

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.

Will I be notified before my account is closed?

Not necessarily. Credit card companies aren’t required to give you any notice that they’re closing your account. The Credit Card Act of 2009 requires lenders and creditors to provide customers with 45 days’ notice of major changes to their account, but that doesn’t include card cancellation notification because of inactivity.

How does this affect my credit history?

A credit card canceled for inactivity may impact you in the following ways:

  • The cancellation may affect your debt to credit utilization ratio, which is the amount of credit you're using as compared to the amount of credit available to you. Creditors and lenders prefer to see a lower ratio of how much debt you have compared with how much available credit you have.
  • Lenders and creditors like to see that you are able to responsibly handle different types of credit. This includes installment loans and credit cards, to name a couple. If you have only one credit card and it is closed, it may impact the variety of your credit types, which could impact your credit scores.

In addition, if a credit card is closed due to inactivity, you may lose card benefits or accumulated rewards. If you have a credit card, be sure to understand the company’s policy about rewards and benefits if an account is closed due to inactivity.

Please note that a closed account isn’t immediately removed from your credit reports. Even if you paid the account as agreed, it can remain on your reports for up to 10 years.

What can I do?

If your card has been canceled but you want to keep it, you can contact the credit card company about the cancellation. Some lenders will reinstate the account, although you may be subject to a credit check. If you decide not to ask that the card be reinstated, it’s a good idea to check your credit report to make sure the card account shows as closed. You can receive a free copy of your credit report every 12 months from all three major credit bureaus – Equifax, Experian and TransUnion – by visiting www.annualcreditreport.com.

How do I avoid having credit cards canceled for inactivity?

To keep a credit card active, you may want to consider using it – responsibly – every few months, if only for small purchases.  You might also consider putting a small recurring charge on the card to keep it active, or making it your primary card for a frequent purchase -- say, for gasoline purchases.