If you have a credit card sitting idle for six months or more, consider making a small purchase to keep it active. Afterward, pay off the balance in full before the end of the grace period to avoid interest charges.
Why Dormant Credit Cards Matter
It’s easy to forget about credit cards you don't use regularly. Whether you applied for a specific reason or tucked it away for emergencies, that unused card could be at risk of being labeled dormant. But what does that mean for your financial health?
What is Credit Card Dormancy?
Credit card dormancy occurs when a card goes unused for an extended period. When this happens, the card issuer may classify the account as dormant, potentially leading to the account being closed.
Dormancy can also occur if you open a new line of credit and never use it. Over time, the account may quietly slip into inactive status without your knowledge.
How Long Before an Account is Closed?
There’s no universal rule for when a credit card issuer might close a dormant account. Some companies may take action after just six months of inactivity, while others might wait two or three years. It all depends on the issuer’s policies and the customer’s overall account activity.
No Warning Required
According to the Consumer Financial Protection Bureau, credit card issuers are not obligated to notify you before closing your account due to inactivity. However, they are prohibited from charging inactivity fees, thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009. This means while you won’t face penalties for inactivity, the closure of an account can still have significant consequences.
The Impact of Closing a Dormant Credit Card on Your Credit Score
Having a dormant card doesn’t necessarily harm your credit, but if the issuer closes the account, it could negatively affect your credit score by:
- Reducing Your Available Credit
Closing an account decreases your total credit limit, which could increase your credit utilization ratio—a key factor in determining your credit score. - Increasing Your Credit Utilization Rate
If you carry balances on other cards, closing a dormant account may raise your overall utilization rate, potentially lowering your credit score. - Shortening Your Credit History
If the closed account is one you’ve held for a long time, it could shorten your credit history, which can also impact your score. - Altering Your Credit Mix
A closed account reduces the diversity of your credit portfolio, another factor that credit scoring models consider.
Why Issuers Care About Dormancy
Credit card companies are in the business of generating revenue. When a card isn’t used, the issuer misses out on potential earnings from transaction fees, interest charges, and other fees associated with card use. Each credit issuer has a limited amount of credit to extend, so they prefer to allocate those resources to active users.
How to Keep Your Credit Card from Being Closed
While there’s no exact data on how many accounts are closed annually due to inactivity, it’s a common occurrence. If you receive a notice that your account is at risk of closure, or if you want to prevent it from happening, here’s what you can do:
- Reach Out to Your Issuer
Contact the credit card company to express your desire to keep the account open. - Make Regular Small Purchases
Use the card for minor, recurring expenses like streaming services or monthly subscriptions. Even occasional use can signal to the issuer that the account is active and valuable. - Monitor Your Accounts
Stay vigilant with all your credit accounts, even the ones you rarely use. This can prevent surprises like unexpected closures.
What If Your Card is Already Closed?
If your credit card has been closed due to inactivity, don’t panic. Contact the issuer and request that they reinstate the account. Explain your intention to start using the card regularly. While there’s no guarantee they’ll reopen the account, it’s worth asking, and it won’t cost you anything to try.
Category: Credit Cards & Loans
