Many individuals rely on credit cards for managing everyday expenses and to establish credit history. They provide convenience and often include perks in the form of reward points and so on.
However, over time, many users stop using cards over prolonged periods of time. Though this might seem insignificant, it can leave a huge impact on your credit health.
What is an Inactive Credit Card
An inactive credit card is one that has not been used for a considerable period of time. The card is still valid on your account, but as no transactions have been made on it during the same period, such cards are often termed as dormant credit cards. There are a number of reasons that individuals could have dormant or inactive cards, such as having several cards or just not needing to use them frequently. However, such dormant cards impact your credit score due to inactivity.
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How Inactivity Affects Your Credit Score
1. The bank may lower your credit limit if you don't use your card. As a result, you will have less credit available overall which can raise your credit utilisation ratio and may lower your credit score.
2. Credit card companies often close accounts that remain inactive for an extended period. When an account is closed, it can shorten your credit history and reduce your total credit limit, both of which can negatively affect your credit score.
3. Using your card on a regular basis and making timely payments helps create a good reported payment history. However, if you do not use your card, there will not be any recent payments reported, which could affect the growth of your credit score.
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What You Can Do to Keep Your Card Active
You can keep your credit card active by making a small transaction every few months. You can also link the card to a regular, low-value payment, such as a subscription or utility bill. This will ensure that the card is used infrequently and effortlessly. By checking your credit card statements regularly, it will also keep you informed about any fees or changes.
If your card has already been blocked or has already become inactive, call the bank to find out the steps about reactivating it. You need to submit a formal request to reactivate your card, along with current KYC documents.
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While an inactive credit card will not directly lower your credit score, an inactive credit card creates situations which could affect your credit score over time. You should use your credit card for small purchases consistently to help maintain a healthy credit profile.
