There can be good reasons to keep a credit card open and not use it. Keeping a no-annual-fee card open can be a zero-cost way to improve your credit score. Every month your card reports a zero balance to your credit reports helps your credit score. Maybe you hold a credit card for some benefit it provides like an extended warranty. But you just haven’t needed to use that card in a while.
In most cases, if you don’t use your account, at some point your bank will close it for you. Your credit score might take a small hit and you’ll lose any rewards you’ve accrued. You probably don’t want this to happen.
What happens if you don’t use your card?
While there is no rule requiring you to use your cards, banks don’t want to keep your credit card open if you’re not using it. If you’re not using your card, the bank isn’t making money. But they are still extending you credit and insuring some small cost to service your account.
In most cases, banks will start the process of closing your account after 18-24 months of inactivity. Your Cardmember Agreement may lay out specific rules about how often you must use your card.
Most banks will send you a notice that your card will be closed if it is not used within a certain timeframe. The bank may give you a month or two to use the card before closing it. If you make even one purchase on your card, your card will remain open. If you don’t use your card the bank will close your account.
What happens if an issuer closes your card?
If an issuer closes your card, you will likely get a notice by mail that your account has been closed. Your account will show as a closed account on your credit report. And your credit report may reflect that the account was closed by the bank.
Having an account closed by a bank will likely cause a small drop in your credit score. But that drop shouldn’t be too large if you have a solid history of paying on-time, every time. Practically, if you have decided that you no longer want a credit card open, closing it yourself is the best option.
And then there’s the question of what happens to your rewards. That depends on your card’s rewards program. With many cash back credit cards and in some credit card points programs, you forfeit your rewards the moment your card is closed. In some cases, you can transfer your points to another card account or you’ll have an option to redeem them for a period. If your card was an airline or hotel credit card and you were accruing points is an airline or hotel loyalty program, your points are probably safe. At least, unless the airline or hotel program has rules about points expiring after a certain period of inactivity. In every case, it’s best to drain your point balances before closing the card yourself if you decide that you don’t want to keep it.
My notice from Bank of America
I recently got a notice from Bank of America informing me that I hadn’t used my account in 24 months. This was a small business credit card that I applied for, but didn’t end up using because my other credit cards offered better rewards on the card’s bonus categories. And there was really no reason for me to continue using the card.
Ultimately, I will end up closing this card. I don’t have a use for it and, since most small business credit cards don’t report to your personal credit report, there’s little reason for me to keep it open.
Best practice? Use cards at least once a year.
In practice, as long as you use your credit cards at least once a year, you won’t be at risk of having a bank close your account. You don’t have to use them for anything terribly huge; just charge a small purchase to your card and pay it off immediately to reset the clock.