Credit Card: Not using your credit card for long? Should you close it or continue?
People often leave their credit cards unused, increasing the chances of the card being deactivated. Even if you don’t use a credit card, the card issuer may still continue to levy annual fees and charges.
A credit card could be helpful for those who are looking forward to convenience of payment and often face cash crunch. Credit cards are also getting widely adapted as they offer cashbacks, discounts and rewards. While some people use credit cards on a regular basis, some often leave them unused for a long period without formally closing them with the lender.
Many cardholders may not have given a thought about what happens if a credit card is left unused for a long time. Is the card closed after a certain period or does it remain active for a lifetime?
There is a lot of confusion around these questions. Let's get into the details for further information.
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What happens when a credit card remains inactive for a longer period?
When cardholders don't use their credit cards for a longer time, it is said to be a case of credit card inactivity. Usually, when the duration of inactivity crosses a certain period, the credit card is deactivated by the card issuer. However, the duration of dormancy for formal deactivation differs depending on the card issuer. While some issuers deactivate a card after six months of dormancy, some wait for at least for a year. There are also instances when the issuer provides a longer wait period before deactivating the card.
In the case of new cards, as per the new RBI guidelines, if a cardholder does not activate his new credit card within 30 days of card insurance, the issuer will seek consent to activate the card through OTP. In case, they don't receive the consent, the credit card account will be closed within seven days of seeking consent.
What to do with an inactive credit card?
If credit cards are not used for a long time, people usually consider closing them. However, experts generally advise to leave the unused credit cards open as closing them would affect their credit score, as the unused credit card has a direct impact on the credit history length and credit utilisation.
To avoid unnecessary deactivation of credit cards, one can consider making small transactions at regular intervals such as doing mobile recharges, paying bills, and other small expenses.
In case your credit card does not provide any major benefits or the annual fee and other charges of the card are very high, one must consider closing such credit cards.