Why you should use your rarely used cards — especially now

Oct 29, 2020

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Editor’s note: This is a recurring post, regularly updated with new information.

Credit card issuers want you to use your cards. After all, a no-annual-fee credit card that sits unused in your sock drawer won’t produce any revenue for the financial institution.

On average, Americans are continuing to handle credit responsibly during the pandemic. But, some consumers are experiencing financial difficulties. And, it’s been difficult for banks to assess creditworthiness during the pandemic. So, to reduce risk, some banks are closing or reducing the credit limit on accounts that consumers aren’t actively using.

However, even if you don’t use some of your cards frequently, you may not want the issuer to close your account or reduce your credit line. Here’s why you may want to keep rarely used accounts open, as well as how to do so.

Get the latest points, miles and travel news by signing up for TPG’s free daily newsletter.

In This Post

Why banks close card accounts

Young woman drinking coffee and using a laptop in her kitchen
You may be surprised to learn that your account has been closed or your credit limit decreased. (Photo by MStudioImages/Getty Images)

Don’t be surprised if a credit card issuer closes a card that you keep tucked away in the far reaches of your wallet or your sock drawer. After all, issuers generally make money three ways:

Issuers want cardholders that will allow them to make a profit through these fees. As such, issuers want to continue offering credit to cardholders who will use their card and not default on their payments.

But issuers also need to minimize the risk on cardholders who aren’t profitable, such as those who don’t use their card but have a high credit limit. Therefore, issuers may choose to decrease the credit line on underused accounts and completely close unused accounts.

Related: Credit cards we’re using most during the pandemic

Why you should try to keep card accounts open

Someone checking their credit score on a smart phone
(Photo by cnythzl/Getty Images)

When one of your card accounts is closed, your credit score will usually decrease. For example, when my mother-in-law closed her cobranded Southwest credit card earlier this year, her credit score dropped by about 20 points.

Five factors go into calculating your credit score. Closing a card can negatively impact two of these factors: credit utilization and account history.

Credit utilization

Once an account is closed, you’ll have less credit available to you. And, having less available credit hurts your credit utilization ratio. For example, if you have $3,000 of credit card debt and four cards each with a $5,000 credit limit, you are using $3,000 of $20,000. But if an issuer closes one of your cards, you are now using $3,000 of $15,000. In this case, your credit utilization ratio will jump despite your debt remaining the same.

Generally, you’ll want to keep your credit utilization ratio under 20% or 30%. Suppose an issuer closes your account or decreases your credit line. In that case, you’ll need to reduce your credit card debt or increase your credit limit to keep the same credit utilization ratio. You’ll either need to pay down debt on another account or ask one of your other issuers for an increase in your credit line. But, doing so will let you minimize the impact on your credit score.

Related: What is a good credit score?

Account history

Your credit score could also dip if the credit card that is closed is one of your oldest. One of the factors that make up your credit score is the length of your credit history. If your credit history’s average length falls because of a closed account, your credit score might decrease. So, it’s best to work extra hard to keep your oldest accounts open.

Related: 6 things to do to improve your credit

How to keep infrequently used card accounts open

One man paying at the grocery checkout
Using your cards periodically is the best way to keep them open. (Photo by Tempura/Getty Images)

There are many reasons you may not use a card frequently. But especially if the card may be useful in the future or is one of your oldest accounts, you likely want to keep the card active. Here are two behaviors that will help.

Spend on each card at least once a year

Generally, you should use an account at least once a year to keep your account active. My husband and I review our accounts about every six months and load $5 from each rarely used account onto my Amazon Gift Card balance. Doing so keeps the accounts active, and we use our Amazon balance to purchase gift cards and other products we need.

There are other ways to spend regularly on your cards. For example, you could set up at least one subscription service — such as Hulu, ESPN+ or Disney+ — on each of your cards. You could also designate each card for a specific category of spending such as gas, groceries, restaurants, travel purchases and charity donations. But, if you take this approach, be sure you align the cards with the categories in which they earn the most rewards.

Related: The best cash-back credit cards for each bonus category

Watch for closure notices

Some credit card issuers will notify cardholders about a card closure, while others will just do it. So, if you receive a notice that your card account will be — or has been — closed, you may be able to keep the card account open by calling and making your case.

For example, about a year ago I received a notice that my cobranded United Airlines credit card was being closed. I called the number on the back of my card and explained to the agent why I wanted to keep the card. I hadn’t used this card in the last year, but I said that I hoped my travel on United would soon increase, which would mean I’d be using my card more. The agent agreed to keep my account open, but I could have prevented this situation by using my card even just a few times each year.

Related: What to do before you close a credit card

Bottom line

Especially as the pandemic continues, it’s vital to recession-proof your credit score. One way to protect your credit score is to periodically spend on rarely used cards. After all, card issuers are less likely to close active accounts. And, you want to keep your card accounts open to maintain account history and credit utilization, especially on cards with high credit limits or long account history.

Additional reporting by Dan Rafter.

Featured photo by Isabelle Raphael/The Points Guy

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.