Is it okay to have a credit card and not use it?
Not using a credit card isn't necessarily a bad thing. However, it can come with some unintended consequences. Although charging inactivity fees is no longer legal, issuers have other options at their disposal — some of which could affect your credit score, your available credit and more.
If you don't use your credit card, the card issuer may close your account. You are also more susceptible to fraud if you aren't vigilant about checking up on the inactive card, and fraudulent charges can affect your credit rating and finances.
Canceling a credit card will cause a direct hit to your credit score, so more often than not, you'll want to keep the account open. Correctly managing an open, rarely-used account may require some extra attention, but the added effort will help your credit in the long run.
Keeping a low credit utilization ratio is good, but having too many credit cards with zero balance may negatively impact your credit score. If your credit cards have zero balance for several years due to inactivity, your credit card issuer might stop sending account updates to credit bureaus.
Responsible Credit Card Uses
Many of us use credit cards irresponsibly and end up in debt. However, contrary to popular belief, if you can use the plastic responsibly, you're actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum.
Here is a list of our partners and here's how we make money. Visit your My NerdWallet Settings page to see all the writers you're following. If you don't use a credit card for a year or more, the issuer may decide to close the account. In fact, inactivity is one of the most common reasons for account cancellations.
Some rewards cards will revoke any unredeemed points, miles or cash back you have saved up if you don't use your credit card at all for a certain period of time – usually around 12 months. And if you don't use your credit card for 6 months or more, the issuer could close your account.
Closing a credit card could change your debt to credit utilization ratio, which may impact credit scores. Closing a credit card account you've had for a long time may impact the length of your credit history. Paid-off credit cards that aren't used for a certain period of time may be closed by the lender.
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.
Skipping the activation step won't exempt you from paying any fees associated with a credit card. A credit card account opens from the moment of approval, not activation; activation lets the issuer know that the rightful card owner received the card.
Is it better to leave credit cards open with zero balance?
In general, it's better to leave your credit cards open with a zero balance instead of canceling them. This is true even if they aren't being used as open credit cards allow you to maintain a lower overall credit utilization ratio and will allow your credit history to stay on your report for longer.
Too many credit cards for most people could be six or more, given that the average American has a total of five credit cards. Everyone should have at least one credit card for credit-building purposes, even if they don't use it to make purchases, but the exact number of cards you should have differs by person.
How often should I use my card to keep it active? While it depends on the issuer, you should use your card at least once every few months to keep it active. Even a small purchase is enough to show your card company that you're still interested in the card.
Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop. This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio.
Nearly all of today's top credit cards offer zero fraud liability on unauthorized charges, which means you won't owe a penny on any charge determined to be fraudulent. Debit cards also limit your fraud liability but require you to report your lost or stolen card within two business days to limit your liability to $50.
You should use less than 30% of a $500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $150 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
You should generally keep unused credit cards open so your credit score benefits from a long credit history and large amount of available credit. But there are exceptions, like if you're paying a high annual fee. At Experian, one of our priorities is consumer credit and finance education.
Owning more than two or three credit cards can become unmanageable for many people. However, your credit needs and financial situation are unique, so there's no hard and fast rule about how many credit cards are too many. The important thing is to make sure that you use your credit cards responsibly.
- Chase Sapphire Preferred® Card: Best Entry-Level Travel Card.
- Capital One Venture X Rewards Credit Card: Best Flexible Rewards Card.
- Chase Sapphire Reserve®: Best Credit Card for Travel Insurance.
- The Platinum Card® from American Express: Best Credit Card for Luxury Travel and Lifestyle Benefits.
How many credit cards is too many or too few? Credit scoring formulas don't punish you for having too many credit accounts, but you can have too few. Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.
Can you decline a credit card after being approved?
You can't decline a credit card after being accepted, but you can always cancel your new credit card if you don't want the new account. Canceling a new credit line might be the right move if you're worried about going into debt you can't pay off.
Consider downgrading the card to a no-annual-fee version if possible. Pay off any remaining balance before closing the card. If you can't do this, consider transferring the balance to a low interest rate credit card, or talking with your card issuer about a payment plan.
If you've ever wondered what the highest credit score you can have is, it's 850. That's at the top end of the most common FICO® and VantageScore® credit scores. And these two companies provide some of the most popular credit-scoring models in America. But do you need a perfect credit score?
No, there is not a strict universal limit on the number of credit cards that is considered to be “too many” or “too few.” Your credit score won't tank once you hit a certain number.
The credit card ranges using the FICO scoring model are: Exceptional: 800-850. Very good: 740-799. Good: 670-739.
