Your Credit Card: Use it or Lose it
Now that banks want to cut back on lending, they’re lowering credit lines for even their most reliable cardholders – and they’re closing unused accounts.
While that might seem OK to you – because you don’t want to use the card and go farther into debt – it really isn’t OK. Your credit score is compiled from many factors, and one of them is the amount of unused credit you have available to you.
Thus, when a credit card account is cancelled, your available credit goes down – and so does your credit score.
The best thing to do – take that card out and use it now and then. And when the statement arrives, pay it in full. That will keep the card active without costing you any money in interest payments. So use it for something you would have purchased anyway – such as groceries or gasoline.
According to a Reuters article in December, the credit card industry plans to cut more than $2 trillion in credit lines over the next year and a half – that’s a 45% decline in the total credit available to consumers.
One reason credit card companies want to close your dormant accounts is that it costs them money to keep an account on the books – and if you aren’t spending any money, that means they’re going in the hole by keeping your account open.
Don’t give them an excuse – use it just often enough so you don’t lose it.
Identity theft is a second reason to use your card…
Most of the time, if you have no current balance and you had no balance the previous month, your credit card issuer won’t send a statement. Thus, a person using your identity would have no problem in contacting the card issuer, having “your” mailing address changed, and using the card until the credit limit was reached.
Since the bills would be going to a different address, and since you wouldn’t be expecting a bill for a card you weren’t using, this could go on behind your back for months.
You wouldn’t know that you had unpaid accounts until you attempted to get credit yourself and learned that your good credit wasn’t so good any more.
That’s why credit experts advise that you regularly check your credit report and/or enroll in a credit alert service.
Since identity thieves like to zero in on those unused accounts, use your card at least every other month, so the use shows on your credit report. Doing so will make that credit card less attractive to would-be thieves.
