Introductory bonuses on miles and points credit cards are awesome, often worth hundreds of dollars a pop to use for free family travel. After that initial boost of goodness, however, all cards are not created equal. You will not reach for most of them on a regular basis. Here’s the problem. Credit card companies will shut you down due to inactivity faster than the Conners killed off Roseanne. How often should you use your credit card to keep it active?
How Often Should You Use a Credit Card to Keep it Active?: Important Considerations
1. Why Would a Credit Card Company Shut You Down?
2. Does the Company Warn You Before They Shut You Down?
3. Why Should You Care if Your Card is Shut Down for Inactivity?
4. How Often Should You Use Your Credit Card to Keep it Active?
5. Ways to Prevent a Card From Slipping Through the Cracks
6. Can the Card Be Reopened After a Credit Card Inactivity Closure?
7. Do You Really Want the Card to Be Reopened?
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How Often Should You Use Your Credit Card to Keep it Active?
1. Why Would a Credit Card Company Shut You Down?
You made your payments on time and carry no balance. Why would a credit card company close your account?
You aren’t technically doing anything wrong, but it costs the company money to keep your account open. It only has so much credit to extend. If your credit card is not used for a long time, they will give your line of credit to someone else.
2. Does the Company Have to Warn You Before it Shuts You Down?
You were a responsible customer that held up your end of the bargain with the credit card company. Can you really have your credit card closed without warning? You sure can. The company is in charge here.
With that said, some companies will give you a heads up. Watch for credit card warning letters in the mail.
Which Companies Provide Warnings Before Closing Accounts?
The following list is not official, and things could change at any time, but data suggests the following company policies regarding warnings:
American Express
American Express will often notify its customer that a card is set to be closed to give he or she a chance to prevent the closure by using the card.
Bank of America
Bank of America credit card inactivity seems to be largely forgiven. The bank generally notifies its customer of the impending closure and provides the opportunity to prevent it.
Barclaycard
Barclaycard, also known to be tight with approvals and retention offers, does not seem to provide advanced warning that your card will be closed.
Capital One
Capital One will often warn the customer of an impending closure to give he or she the opportunity to prevent it by using the card.
Chase
Chase seems to go both ways, with some reporting a credit card closed due to inactivity without warning, and others being given the opportunity to prevent the closure.
Citi
Citi has been known to shut people down without warning, but usually after a longer period of inactivity (24 months).
3. Why Should You Care if You Are Shut Down?
Why should you care if your account is shut down? You didn’t use it anyway, right? Maybe, but there are potential consequences.
A. Unused Miles and Points Will Be Forfeited
Seriously, my credit card company can shut me down without warning and keep my points? Yep. Some companies will give you a warning that your card will be closed on a date certain in the future so you can spend any unused points, but not all.
B. Your Credit Score Could Take a Hit
Does credit card inactivity affect your credit score? It might.
Your credit score is determined by several factors, the most important of which is whether you pay your bills on time. However, a credit card closed because of inactivity can affect your credit score in two big ways.
B1. Credit Utilization Ratio
What does credit utilization mean? Your credit utilization ratio measures how much of your available credit you use. Ideally, you would use less than 10% of your available credit, but definitely no more than 30%.
Note: Using your credit each month is not the same as carrying a balance. If you are not paying your balance in full each month, you should not be churning through cards. The interest and fees will far outweigh the benefits you receive.
How Much Does a Closed Account Affect Your Credit Utilization Ratio?
If you have a bunch of credit cards, the closure of one will not really matter. If you just have a couple, this could be a big problem, as illustrated in the examples below.
Example 1
You have two credit cards with credit limits of $10,000 each, for a total available credit limit of $20,000. You charge $5,000 per month. The $5,000 you have on your card at any one time divided by your total credit limit of $20,000 gives you a credit utilization of $25%.
Monthly Spend: $5,000
Total Available Credit Limit: $20,000
Credit Utilization Ratio: 25% ($5,000/$20,000)
If one of your two cards is shut down, you now have a total available credit limit of $10,000. When you divide the $5,000 you charge each month by your $10,000 credit limit, your credit utilization is a whopping 50%.
Monthly Spend: $5,000
Total Available Credit Limit: $10,000
Credit Utilization Ratio: 50% ($5,000/$10,000)
Example 2
You have ten credit cards with credit limits of $10,000 each, for a total available credit limit of $100,000. You charge $5,000 per month. When you divide the $5,000 you have on your credit card at any one time divided by your $100,000 credit limit, you have a credit utilization rate of 5%.
Monthly Spend: $5,000
Total Available Credit Limit: $100,000
Credit Utilization Ratio: 5% ($5,000/$100,000)
If one of your ten cards gets shut down, you now have a total available credit limit of $90,000. When you divide the $5,000 on your credit card by the $90,000 credit limit, your credit utilization only increases to 5.5%.
Monthly Spend: $5,000
Total Available Credit Limit: $90,000
Credit Utilization Ratio: 5.5% ($5,000/$90,000)
All other things equal, the person in Example 2 doesn’t need to care that much about the closure, but the person in Example 1 should definitely be concerned.
B2. Average Age of Accounts
Your credit score is affected by the average age of your accounts. Credit card companies like to see old accounts when approving you for new cards. They don’t want customers who cycle through and close cards faster than the Kardashians burn through hair dye and lip gloss.
Note: The following examples are not perfect math because closed accounts may be factored into the calculations, but generally, consider the following:
Example 1
You have two credit cards, one that is two years old and one that is ten years old. The average age of your accounts is six years. If your credit card company closes the ten year old card, the average age of your accounts drops to two years.
Credit Card Ages Before Closure: 2 years old and 10 years old
Average Age of Accounts Before Closure: 6 years
Closure: 10 year old card is shut down
New Average Age of Your Accounts: 2 years
Example 2
You have two credit cards, one that is two years old and one that is ten years old. The average age of your accounts is six years. If your credit card company closes the two year old card, the average age of your accounts becomes ten years.
Credit Card Ages Before Closure: 2 years old and 10 years old
Average Age of Accounts Before Closure: 6 years
Closure: 2 year old card is shut down
New Average Age of Your Accounts: 6 years
4. How Often Should You Use Your Credit Card to Keep it Active?
How can you prevent having your credit card closed for inactivity? There are no guarantees that a credit card company won’t shut you down, and every company has different internal policies. However, shooting for using the cards once every six months will probably be enough to keep them open. If you are really in it to win it, consider using them every three months.
5. How to Keep Credit Cards Active to Prevent a Closure
After a few years of applying for new cards, you will probably have enough to build a house of cards that would put the Brady Bunch kids to shame. You have to spend on the cards periodically to keep them. How can you possibly be expected to know how to rotate credit cards regularly?
A. Apply Different Cards to Different Recurring Bills
Set one credit card to automatically pay your utility bill and another to cover your car insurance.
B. Apply Different Cards to Different Online Accounts
Save different credit cards as default payment methods for purchases you know you will periodically make at specific online retailers.
C. Set a Calendar Reminder
Set a calendar reminder for yourself once every six months to do a sweep of your credit card statements to make sure you used them all at least once in the last six months.
Pro tip: Set all credit cards to autopay in full and forget them. This way, you won’t have to keep track of multiple due dates. Your credit score will take a serious hit from even one late payment.
6. Can the Card Be Reopened After a Credit Card Closure Due to Inactivity?
If your credit card is closed due to inactivity, can it be reopened? Maybe. You should try to call the company sooner rather than later.
Whether it can be reopened largely depends upon the company’s internal policies and the mood of the representative to whom you speak. I would try something like: “My bad. I really love this card, and by the way, I assume your hair looks lovely today even though I can’t see it.” I would follow that gem up with an offer to make a purchase right away.
If the company refuses to reopen it and you have more than one card with that company, it is worth it to ask if the credit limit can be moved to the card that it still open so you can maintain the same credit utilization ratio.
Note: Reopening a closed account may require a credit card inactivity fee or hard credit pull (which also affects your credit score, but much less so than taking a hit to the other factors mentioned above).
7. Do You Really Want it to Be Reopened?
Do you even want this card anymore? If you weren’t using the credit card and it comes with an annual fee, you should seriously consider whether it is worth it to you to keep it open. A card that costs you money without providing benefits that make up for the expense is probably a pass unless it will completely destroy your credit score.
Pro tip: Call your credit card company before they shut you down and ask for a retention offer or product change to a no annual fee card to keep the account open and aging.
Final Thoughts – How Often Should You Use Your Credit Card to Keep it Active?
A credit card shutdown due to inactivity isn’t the end of the world, but having a credit card and not using it isn’t ideal either. You want to maintain a good credit score so you can periodically take out new miles and points credit cards to travel at a discount.
How often should you use your credit card to keep it active? Shoot for a minimum of once every six months.
Collect miles and points to travel at a discount and make memories with your family. You will not regret it.
