Key Points About: What Happens If You Don’t Activate a Credit Card
Consider this scenario: you apply for a credit card, get approved and the card arrives a few days later. But you forget to activate it or have second thoughts about activating it and put it off. What happens if you decide to hold off on activating the card, until you’re sure you want to use it? Does a never-activated credit card affect your credit score, even if you don’t technically activate it or make any purchases with it? The simple answer is: yes. There are some key points to consider about not activating a credit card: Simply applying for credit can impact your credit scoreFirst, even though you need to activate the card in order to make purchases with it, whether or not you activate a credit card does not have an effect on your credit score. By going through the process of applying for a new credit card and opening the new account, you have already been approved for a certain credit limit, even if you never activate the card. The key action that affects your credit score is applying for that card in the first place. During the process of applying for a new credit card account, your credit history has already been pulled and checked by the credit card issuer, and that “hard inquiry” may have an effect on your credit score. Never activating your card may have consequencesIf you don’t activate your card, there are a few things to watch out for that could sneak up on you. What if you didn’t activate your card as soon as you got it?If you don’t activate a credit card within a certain timeframe and don’t use it, your account may be closed automatically. This may affect your credit by increasing your credit utilization ratio, shortening your credit history, or reducing your credit mix. How long do you have to activate a credit card?Your card issuer may contact you if you haven’t activated your card after a certain amount of time (typically 45 to 60 days) to determine if you received it. If you wait longer than that, you may need to request a new card; and if you wait even longer than that, card issuers typically close accounts that aren’t used within a certain time period, usually over a year. What happens if you never activate a credit card?If you get a card with an annual fee, you risk lapsing this payment and hurting your credit score. This fee is often charged on your first bill and repeats annually on the anniversary of your account opening. Missing it or making a late payment toward it will negatively affect your credit score. Responsible use is beneficialOnce you have the new credit card, any impact on your credit score — as a result of applying for the new credit account — has already occurred. So, as far as your credit score is concerned, any impact to your credit score happens after applying for the card, not as a result of activating the card. In many cases, it’s how you use a credit card that really matters. In some cases, opening a new credit account can give you a higher total credit limit, which can improve your credit utilization ratio — the percentage of your total available credit that you’re using — so long as you don’t rush to max out the new card. Using your credit card responsibly to make occasional small purchases and paying the bill on time and in full can help you build credit history without incurring interest charges on purchases. Closing your new credit card account might actually hurt your credit score, because it would reduce your total available credit and thus make your credit utilization ratio look higher to the credit reporting agencies. If you’re having doubts about whether you actually want your new card, you can always cancel it. But if you are confident that you can use the new card responsibly, and pay it off on time without accumulating debt, go ahead and activate it and proceed to use it wisely. Instead of looking at a never-activated credit card as a possible threat to your credit score, think of the potential to use the card to help build your credit. The credit card issuer has already decided that you are creditworthy enough to receive the new card. As long as you can use your new credit limit responsibly, your new card can be a source of convenient spending, cash flow management, and can even help you build your credit over time. There are many reasons you may choose to stop using a credit card, whether you simply have too many cards to keep track of or you no longer like the terms of a specific card. Doing this could actually keep you from overspending and racking up debt, but is there a downside you need to know about? In this article, we’ll explore the consequences of not using a card and how you can avoid them in the future. Here’s what happens if you don’t use your credit cardWhether you stop using your card for a month or ten months, there may be some drawbacks to your card becoming inactive. 1. You could overlook fraudulent activitySome credit card issuers will create card statements every month, no matter if you have new charges to report or not. Others, however, will only post statements if you have activity on your account. Not getting statements could put you into the habit of failing to check your account each month, and fraudulent activity may occur without you noticing. Pro tip: Check your account statements every month, even if the card has been in the back of your dresser drawer for some time. Catching fraud will help keep your credit report in good shape. 2. You could pay feesDoes your card have an annual fee? If you signed up under a special promotion where the fee was waived for the first year or two, you may be under the impression there’s no fee at all. However, many cards will reinstate these fees after the promotional period, meaning you pay even if you don’t use the card. If you’re getting charged an annual fee and not enjoying the benefits, that could be a real waste of your money. Pro tip: Some cards will waive the annual fee if you contact them and communicate your desire to use the card again. Just ask. 3. The card issuer could close the accountMost cards will close your account after a period of inactivity. Not making any purchases could tell the company you're not interested in giving them your business. While most cards will send you a courtesy notice letting you know of pending closure, you may miss it. 4. Credit card rewards will expireRewards don’t last forever. Whether it’s a cash back rewards program or points you can use for travel, any perks you've accrued over time with your card may be at risk. Even if a program says its "rewards never expire," you will lose access to them once the account is closed. 5. Unpaid balances will continue to grow interestAre you sure that your credit card balance is zero? If you’ve not used a card account in a while, you may have a small balance you didn’t know about. Whether it’s the few pennies you didn't take care of when you made your last payment or a recurring charge from a subscription service, these unpaid balances can get costly if late fees pileup. 6. Your credit utilization may be impactedFinally, if the account is indeed closed as mentioned earlier, this can be bad for your credit score, specifically with your credit utilization. All of that unused but total available credit is no longer counted toward your total lines of credit, causing your utilization ratio to go higher. A higher utilization rate can lower your credit score. Learn more about what impacts your credit score in our comprehensive guide. How long can you go without using a credit card before your account will be closed?To know how long you can go without using your card, reach out to the customer service number on the back of your card. The exact time frame you have to use your card again will vary by the credit card company.[2] Some cards could allow you to go a year or more without activity, while others could close up your account sooner.Most cards will send an email or letter letting you know of the potential action, but don’t take this for granted and instead just keep track of when your cards may close. How can you keep credit cards active?Even making one small purchase every few months should be enough to keep a card active. Balance transfers also count as a way of keeping your card active. With low promotional interest rates being offered to cardholders, this could help you pay down higher-APR credit card debt and save on interest. Should you close a credit card yourself?You can always close a card on your own, as long as the balance is paid down to zero. The question you need to ask yourself is, "Do I want to?" In addition to a possibly lower credit utilization ratio and loss of reward perks, not having a card available could force you to use another method of payment. Debit cards are an option, but many don’t come with the same protection of a credit card account. While most credit cards won’t hold you liable for fraudulent purchases, a debit card account might. Even if the financial institution investigates the claim and doesn’t hold you liable, you may not have access to your own money while they conduct the investigation. This is one reason many people keep at least a single credit card available. Why should you open a credit card?If you don’t already have a credit card, you may be wondering if it’s worth applying for. As explained before, it can help keep the funds in your banking account safe in a way that doesn’t always come with debit card usage. Other benefits include: ● Credit card rewards, such as cash back, airline miles, free merchandise, free checked baggage, or hotel stays ● Extended warranty, purchase protection, and accident coverage (for some cards) ● More access to credit, which can lower your overall credit card utilization ratio and help your credit score ● Can add another type of credit to your credit history, especially if you only have a mortgage or car payment(installment loan), which may help improve your credit score ● May give you a better way to budget for larger purchases and pay them off over time in a more affordable way than retailer financing or taking out a cash advance loan How to use a credit card responsiblyAll of these card benefits have their added responsibilities. You’ll need to take the repayment of the card seriously and prioritize it in your budget. Here are some tips for keeping your accounts in good standing: ● Pay off some or all of your card balance every month. Never make a late payment, and take advantage of automatic payments, if possible, which can deduct the minimum payment from your bank account before the due date. ● Know your credit limit, and don’t charge up so much that you get close to that limit. Going over your limit can cause you headaches, including fees and a larger monthly credit card bill to pay. ● Only use secure websites and payment methods when paying online. Don’t give out your card information over the phone or through emails or text messages. ● Sign up for electronic statements and email reminders to help you never miss a payment. ● Sign up for account alerts, such as when a large purchase posts to your account. This can notify you of fraud and help you stay aware of how you are using your card. ● Use your card as part of a. responsible budget, not as a substitute for saving and planning. While credit cards provide a secure way to buy things and track spending, they shouldn’t be used in a way that you can’t repay promptly. If possible, pay your account in full every month to potentially avoid interest and fees and keep a perfect payment history. SummaryYou shouldn’t feel you need to use a credit card if it doesn’t fit your lifestyle. Opening a new credit card account won’t necessarily solve your problems, even though there are some really great things you can do with it. It also makes sense to use one in many situations, especially if you want to build credit or obtain specific rewards, like those offered through Petal. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is “as is” and carries no warranties. PetalCredit Cards are issued by WebBank, Member FDIC. Can I cancel a credit card that I just applied for?If you decide you don't want to hold on to a credit card after applying and being approved by the issuer, you can still cancel your account. Think a bit about the consequences before you cancel. If you do decide to cancel, make sure to get a written confirmation of the account closing.
Is it better to cancel a credit card or just not use it?Credit experts advise against closing credit cards, even when you're not using them, for good reason. “Canceling a credit card has the potential to reduce your score, not increase it,” says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report.
What happens if I never use a store credit card?What Happens If You Never Use a Store Credit Card? If you open but never use a store credit card, nothing will most likely happen. However, the issuer could close your card due to inactivity.
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What happens if you apply for a credit card and never use it
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