How often should I use my credit card to keep it active?

The short answer is that nothing is likely to happen if you don’t use your credit card for a few months. Not using your card could actually help your credit score if you have a $0 balance when you stop (contrary to some common myths about keeping a small credit card balance being beneficial).… read full answer

The longer answer is that exactly what happens if you don’t use your credit card depends on which card you have. 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. But there’s no standard timeframe for when a credit card issuer will decide to close an account due to inactivity.

Having your account closed due to inactivity could hurt your credit standing and possibly make it seem like your credit history is shorter than it really is. However, you will not be charged any sort of inactivity fee by your credit card company if you don’t use your card to make purchases or other types of transactions for a prolonged period of time. Credit card inactivity fees are banned by law.

As a result, not using your credit card (at least not regularly) can be a great strategy if you want to build credit but are worried about overspending. You just have to make sure your balance is $0 when you stop using your card. A credit card with no balance will get reported to the credit bureaus as being in good standing each month, with an on-time payment and 0% credit utilization. That in turn will lead to credit score improvement if you manage the rest of your finances responsibly.

For your convenience, we’ll summarize the key points to remember below.

Here’s what happens if you don’t use your credit card:

• Nothing is likely to happen if you don’t use your credit card for a few months, as long as you make bill payments for any recurring monthly charges.
• The credit card’s issuer may decide to close your account after a long period of inactivity. There is no standard timeframe, but they will often send a notice in advance and give you a chance to use your card first.
• Some credit card rewards will expire after a certain period of account inactivity. You’ll also lose any rewards you’ve yet to redeem when your account is closed.
• If the credit card you’re not using has a $0 balance and is in good standing, positive information will be added to your credit reports each month the account stays open.
• Unpaid balances from before you stopped using the card will continue to accrue interest. If your balances have been paid in full, you won’t have to send in any new payments.
• If your credit card charges an annual fee, not using the card won’t get you out of having to pay. And if you’re not getting anything out of a card that you’re paying for, you might want to close it.

The bottom line is that not using your card can still be good for your credit. And it’s far better than using your card irresponsibly. So if you don’t trust yourself to limit your spending, it may be wise to set your card aside until you have a necessary expense.

You should use a credit card when you are making a big purchase, building your credit, traveling overseas or domestically, making hotel or car rental reservations, spending money in an emergency, and even making everyday expenses. In fact, if you can use a credit card for a purchase, you probably should, because all credit cards offer a … read full answer$0 fraud liability guarantee. If someone does steal your credit card information, all fraudulent charges will simply be cancelled, which is preferable to your checking account getting drained or frozen as you wait for a debit card fraud claim to get processed. And of course, when cash is stolen, it’s usually gone for good.

Rewards are another great reason to opt for credit cards when making a purchase. Rewards credit cards offer cash back, points, or miles for purchases – some of which can be worth up to 5% of the purchase amount, depending on the credit card. It’s essentially a discount on everything you buy with the card. Some travel credit cards offer benefits, such as luggage and rental car insurance, that can be very valuable to a frequent traveler. But you only get those benefits when you use the card for the travel purchase.

Examples of when to use a credit card:

• To Build Credit. Credit cards are by far the easiest and most practical way to build credit history. Each month you have a credit card – even as an authorized user – credit bureaus receive information about your account. If you pay the bill on time every month and avoid racking up a big balance, you’ll have a good credit score as time goes on.
• In Emergencies: Credit cards are a good option for surprise situations that no one plans for – car trouble, emergency vet bills, and household repairs, for example. And if your emergency savings aren’t quite where they should be, a credit card can offer a certain peace of mind. Sometimes paying interest can cost less than the alternatives.
• For Everyday Purchases: Regular expenses like gas, cellphone bills, and groceries present opportunities to capitalize on a rewards credit card. You will ultimately save money from rewards like cash back, points, or miles. Just don’t undo rewards savings by carrying a balance and paying a bunch of interest.
• For Large Purchases. Credit cards with 0% APR periods are great financing opportunities for big purchases. And they may offer extra safeguards that come in handy with a large purchase, such as price/purchase protection or extended warranty benefits. Using a rewards credit card will make the big purchase a little cheaper, too.
• To Pay Off Debt. Using a credit card to pay off debt may sound contradictory. But if you have an existing high-interest debt, a balance transfer credit card could allow you to pay it off faster and for less money. Look for a balance transfer offer that doesn’t charge a transfer fee and has the longest interest-free period.
• When Traveling: Hotels and car rental agencies often put pre-authorized deposits or holds on your debit or credit card. It is better to have funds temporarily held up on a credit card than your checking account. It’s also worth noting that credit cards are the cheapest way to convert foreign currency, so using a credit card overseas is an excellent idea – as long as you have one with no foreign transaction fees. Keep in mind that some credit card companies ask for notification before a cardholder starts traveling, so that they don’t mistake card activity from a new area for fraud.

It’s worth considering that your income and credit score might determine which scenarios you’ll benefit from using your credit card. For example, if you have a high interest rate or low credit limit, financing big-ticket buys may not be an option. So start small, with putting one or two regular expenses like gas or a gym membership on your card. Pay it off in full each month to create a history of responsible credit use – and to avoid credit card debt.

Lastly, there are times when using a credit card is a bad idea. Consider yourself and your habits before you take this advice to use a credit card for everything. Yes, credit card use has its benefits. But most of those benefits come with a big responsibility to not spend more than you can repay in a reasonable amount of time, and none of those benefits outweigh the negative effects of prolonged credit card debt.

If you don’t trust yourself to use a credit card for purchases, you can still build credit by simply having a credit card – even if you don’t use it.