Is your credit card lying idle? It is important to know how it can affect your credit score

In today’s time, many people use credit cards, but sometimes some of us can have more than one credit card or sometimes we reduce the use of a particular credit card. But have you ever thought that if your credit card is not used for a long time, what will happen to it? And will it affect your credit score (also called CIBIL score)? Come, let’s know about this in detail.

Inactive (not used) credit card and your credit score relationship

In short, not using a credit card for a long time, your credit score does not directly “bad”, at least until the bank turns off that card itself. But, there are some aspects that are very important to pay attention:

1. Impact on credit limit: If you have a credit card that has a high limit, and you do not use it, it can still help improve your “credit utilization ratio”. This is the amount that you have used in the total available credits. If you have many cards and are not used at all, then your total available credit decreases, which makes your credit utility ratio look more. It is considered good to keep this ratio less than 30%.

2. Card closure: Banks usually shut down credit cards that have not been used for some time (often from 6 months to 1 year). Banks do this so that they do not have to bear the cost of maintaining cards.

   • What happens when the bank closes the card? When the bank turns off your passive card, the credit limit attached to that card also ends. This means that your total available credit has decreased. If the limit of this closed card was high, then your credit utility ratio may have a negative impact.

   • Loss of historical information: A credit card, even though it has stopped now, but the record of its use and payment remains part of your credit history. A long and good credit history (also closed credit cards with good payment history) is good for your credit score. If the bank turns off your passive card, you may have to be deprived of the historical benefits of this “good behavior” received from that card.

3. fees paid: Some credit cards may charge annual maintenance charge (annual maintenance fee) or other types of fees, whether you use them or not. If you are not using any passive card and is paying any fees on it, then you can unnecessarily lose money. It is better that you close such cards which are fees and which you are not using.

What to do?

• Make small transactions regularly: If you have a credit card that you do not use a lot, then make a small bill (eg ₹ 500 or ₹ 1000 recharge or online payment) every 2-3 months and pay that amount on time. This will keep the card active and your credit score will also have a good effect.

• Pay attention to card fees: If you do not use the card that you do not use at all and fees it, consider closing it. You can also ask the bank to forgive the fee.

• Just don’t stop the card that is not using: If there is no fee on your passive credit card and its limit is good, it can help to maintain your credit utility ratio and credit history length.