The Penalties for Not Using Credit Cards

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Card issuers have the right to close inactive credit card accounts.
Card issuers have the right to close inactive credit card accounts. (Image: Jupiterimages/Comstock/Getty Images)

People who don't use their credit cards face direct and indirect penalties. Some card issuers take action against unused credit accounts because they hamper their profits. Those actions also may cause their customers' credit scores to drop. Consumers inadvertently penalize themselves by paying fees to their card issuers and then not using their cards to make the fees worthwhile.

Credit CARD Act

The U.S. Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 forced credit card companies to stop charging cardholders fees for not using their cards. Those charges are known as inactivity fees, and some card issuers used to add them to their customers' bills if they didn't use their cards for a specific amount of time. Yet cardholders should watch out for other charges even though the CARD Act bans inactivity fees. For example, some card issuers charge annual fees instead, which are fees cardholders pay just for having a credit card account.

Forced Cancellation

Your credit card company may cancel your card for you if you don't use it for a long period of time. It costs card issuers money to keep inactive accounts open. Furthermore, they don't earn interest on unused accounts that have zero balances. Card issuers' rules for closing inactive accounts vary. Some banks close credit card accounts that aren't used for a few months, while others allow accounts to remain inactive for as long as three years.

Credit Scores

Your credit score could drop if your inactive credit card account is canceled by your card issuer. Thirty percent of your FICO credit score is partly affected by the proportion of your credit lines that you use. The less you use, the better. Someone who has $10,000 in total available credit and $4,900 in credit card debt would suddenly be maxing out his credit lines if an account with a $3,000 credit line is closed. That's because his total available credit would be reduced to $7,000, and he would then be using up 70 percent of his credit lines due to his $4,900 of debt.

Considerations

Cardholders can inadvertently penalize themselves by not using their credit cards. For instance, people who have rewards cards that offer cash-back rebates and travel discounts are usually paying an annual fee for those cards. Therefore, people who don't use rewards cards are paying for access to perks they can't claim because they don't make purchases with their cards. Some rewards cards offer ways to earn valuable rebates for things you frequently buy, but avoid overspending just to get rewards.

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