Is it OK to have a credit card and not use it?

The Silent Risk: Why Leaving Your Credit Card Unused is a Bad Idea

Many people believe that owning a credit card, but not using it, is a safe financial strategy. The thinking often goes: no spending means no debt. However, this approach carries significant, often overlooked risks that outweigh the perceived benefits. While avoiding debt is commendable, an inactive credit card can become a liability, potentially leaving you vulnerable to fraud and harming your creditworthiness.

One of the most significant dangers of an unused credit card is the likelihood of account closure. Credit card issuers often close inactive accounts after a period of inactivity, typically ranging from six months to a year, depending on the issuer and the card’s terms. This closure isn’t just an inconvenience; it erodes your credit history. A longer credit history, demonstrated by consistently active accounts, positively impacts your credit score. Closing an account shortens that history, potentially lowering your score and impacting your ability to secure loans or even rent an apartment in the future.

Furthermore, an inactive account significantly increases your susceptibility to fraud. While you might not be using the card, fraudulent activity can still occur. If the account is closed, the detection of fraudulent charges may be delayed. This delay means the fraudulent activity could go unnoticed for a longer period, resulting in greater financial losses. The process of disputing fraudulent charges and restoring your credit can be lengthy and stressful.

Regular monitoring of your credit card accounts is essential, regardless of usage. This includes checking your statement for any unauthorized transactions and reviewing your credit report for any irregularities. However, if the account is inactive, it’s easy to overlook it, making it a prime target for fraudulent activity that might go undetected for an extended period. The longer the fraudulent activity goes unnoticed, the greater the potential damage to both your finances and your credit score.

In short, while the temptation to keep a credit card solely for emergencies might seem logical, the potential downsides outweigh the advantages. The risk of account closure, the increased vulnerability to fraud, and the negative impact on your credit score make it inadvisable to maintain a completely unused credit card. Instead, consider making a small, recurring purchase (like a subscription service you already use) or periodically using the card for a small transaction to keep the account active. This minimal usage maintains your credit history and ensures you retain access to your credit line should you need it, while minimizing the financial risk. Regular monitoring, of course, remains crucial regardless of your credit card usage habits. The peace of mind it provides far outweighs the minimal effort required.