A credit card is a great financial tool that helps you manage your finances, earn rewards, build credit and more. But what happens when due to certain reasons or for financial stability, you decide to limit your credit card spending? On one hand, putting a limit on your spending and not using your credit card can be a good way to avoid overspending but it is significant to understand what inactivity does to your credit card?
What is credit card inactivity?
Credit card inactivity is the non-usage of credit card for an extended period of time. When the duration crosses a specific period, the credit card is deactivated by the provider company. The duration of dormancy for deactivation may vary from one provider to another. Generally, banks deactivate a credit card after six months of dormancy but this is not the case for every card.
When is a credit card deactivated by the provider?
There is no specific time period for which a bank waits before deactivating an inactive credit card. It varies from one bank to another. Some issuers deactivate a credit card after 6 months of dormancy while some after 12. However, there are instances where the issuer might allow a longer time of inactivity before deactivating your card.
An issuer does not deactivate credit cards quickly. Deactivating a credit card account would mean a loss in business. So an issuer might give the required time even after an extended period of dormancy. However, a time comes when the cost incurred by the issuer goes beyond the revenue generated from it. In such cases, the issuer decides to deactivate your credit card.
When should you deactivate your credit card?
It is not the case that only the issuer/provider can deactivate your credit card, you can also get your credit card deactivated if in case you face any of the below-mentioned conditions-
- There may be a condition that you have a number of credit cards and you do not need a card that incurs a high annual fee
- Some banks allow you to keep more than one credit card for the same account but the credit limit remains the same i.e., shared between the two cards. You can deactivate one out of the two
- In case you have huge outstanding on your credit card and are unable to make the payment, you can opt for balance transfer of your funds to your another card that has a low-interest rate and close that card
Why should you keep using your credit card frequently?
There are a number of reasons for keeping on using your credit card. Some of them are mentioned below:
- Your credit card comes with a number of benefits which you may not be aware of. Some of these benefits may include but not limited to offers like personal accident cover, air accident cover, reward points, insurance against fraudulent activities, etc. These benefits expire if the card is not used regularly. In case you leave your credit card inactive, these offers may cease to be provided on your card.
- Most Reward Programmes come with an expiration clause and if you do not use the card or points before the deadline, your points might get expired.
- In case you do not use your credit card quite often, you may not be able to detect fraudulent activities, if any. You have to report any fraudulent activity within 30 days of transaction and if not reported, the issuer will charge you for the transaction which was not done by you.
- Many cards provide milestone benefits and if you use your credit card quite frequently, you may end up getting huge benefits from the issuer.
What inactivity does to your credit score?
Your credit card comes with a credit limit and when you make any transaction using your credit card, your credit limit is blocked for that amount. The ratio of used limit to the total available limit is known as credit utilization ratio. It is recommended to keep your credit utilization ratio below 30%.
When you close a credit card account or it gets deactivated, your credit limit for that card gets reduced from your overall credit limit which in turn increases your overall credit utilization ratio. If the overall ratio goes beyond 70%, your credit score might get impacted.
|Tip: Always maintain a credit utilization ratio of less than 30% on your credit cards. A low credit utilization ratio improves your credit score as it is the second most important factor that bureaus consider after your payment history.|
How to prevent your Inactive Credit Card Closings
You can prevent your credit card from deactivation by following some of the simple tips mentioned below:
|Tips to prevent your credit card from deactivation|
|1. Carry out even a small transaction on your credit card. This will help in keeping your card active and you will also be able to track any fraudulent activity on your card.|
2. Make an extensive plan on using your specific credit card for a specific purpose to increase your savings.
3. Make your payments on time. In case you have used up your credit limit, your card will be temporarily deactivated by the issuer till you pay the outstanding amount.
4. Transfer the outstanding balance on one credit card to another and convert it in easy EMIs.
Do credit card issuers have to inform before deactivating an inactive credit card?
It is not mandatory for a credit card issuer in India to inform you about your card deactivation due to inactivity. Though, in some countries, certain provisions have been made for the issuers to inform the user 30 days prior to deactivating the credit card.
However, most credit card providers send intimation 30 days before closing the credit card account as even they want the user to continue using the card and keep the account active.
What should a cardholder do if the credit card is deactivated due to inactivity?
In case your credit card is deactivated due to dormancy, you should take the steps mentioned below to prevent any altercations in future:
Contact the issuer for reactivation – A simple follow up by the cardholder can sometimes lead to reactivation of the credit card. However, you can send a written request to the issuer to reactivate your credit card mentioning that you have always made the payments on time and have a good credit history.
Check your credit score – If the limit of your deactivated credit card was pretty high, your credit score may take a deep plunge owing to the increase in your overall credit utilization ratio. Check whether your credit score is least impacted and if there is a considerable drop in your score, you can take corrective measures to rebuild your credit score.
Monitor your credit report for closure – Do monitor your credit report every month to ensure that your credit card account is closed in the report as well and there is no outstanding bill on the account.
If you want to check your credit score every month for free, click here.
It is never recommended to get your credit card deactivated especially when it is your first credit account as it is said that “the longer your credit history, and older your average account, the more reliable you look”. However, if your credit card is of not of much use to you, you can get it deactivated on your own as well. Outside of the credit score implications, the involuntary closure of a credit card could lead to unused reward points attached to your card being forfeited.
I stopped using my Kotak Credit Card in 2014 and ever since I have not paid the dues. When I checked my CBIL score recently, I still had a overdue of 23k and my credit score was negative. I no longer have the card with me and it is not active. Can I pay the overdue amount and close the account so that my credit score improves. Please advise.
Yes, you should pay the overdue amount on your card as soon as possible. Non-payment will lead to further charges which will be added to your outstanding balance. Once you pay off your bills in full, your credit score will gradually improve over a period of 2-3 months.
Hi. I got myself a credit card but later I realized that I dont need one. Then I did not generate the pin and never used the card. Its been a year now. But today I got a message about the amount which is going to be debited from my a/c on 13th Oct. (I,e around 3k) I have deactivated the card but do I have to pay the amount?
Hi Priya Randhir,
You may have been charged the annual fee of the card as it is applicable irrespective of whether you have used the credit card or not. If the amount has been billed, you must pay it as soon as possible in order to avoid any late payment charges or finance charges. For further assistance in this matter, please speak with the customer care department of the card-issuing bank or NFBC.
I have not used my credit card since it has been given(4years) and while giving they told it was life time free credit card like that but from this year Jan I’m continuously getting msg like credit card bill payment pending and monthly they are increasing the amount around 600/-( now pending bill is around 3500) and also there is no account has been linked to it previously linked account has been closed(salary accounts). Like this two credit cards are there from same ICICI bank when I asked to bank regarding this they are telling like 2 credit cards have been linked and after paying bills you can close like that. Anyone please suggest what to do…
How can I change my mobile number registered with credit card?
Different card issuers have different procedures for updating the registered mobile number. You should check whether your bank/NBFC allows mobile number update via net banking or mobile app. You can also call on the customer care number or visit the nearest branch for more details.
I am not using my Tata credit card for 10 years, all dues were paid 10 years back. i was not getting any statement for 5-6 years and i thought my credit card becomes inoperative.
but suddenly 3 years back i got statement with Rs. 500 maintenance charge, i never saw that because it was on my old email account. today that amount is Rs. 5000 with penalties over it.
Do i have to pay this amount to tata card, is it legal to charge annual fee on inoperative credit card account?
Unless you get your credit card account closed, it will remain active and annual charges will be levied as applicable, even if you do not use the card. If you wish to close this account, you will be required to clear the bill.
Also, if you are certain that you will never use this credit card, it is recommended to clear the bills and close the account as soon as possible in order to avoid any more penalties.