When it comes to credit, finding the right balance can be a challenge. You may think a keeping a credit card without a balance can help your credit score. But by not using your credit card, you risk having the card canceled due to inactivity, which can lower your credit score.
Losing an Old Account
If your credit card has been in your wallet for quite some time, chances are it has helped boost your credit score. Your credit score is partially determined by the length of time your accounts have been open. When your credit card is canceled, you lose the positive credit associated with the card.
Losing the Available Credit
Your credit score is also based on the available credit. Credit utilization is your balance to available credit ratio. If you have a credit card with no balance and a high credit limit, the available credit is increasing your total amount of credit. When the card is canceled, you lose the credit. If you have other credit cards carrying balances, you will need to pay down the debt to compensate for the credit loss.
Prevent Your Card from Being Closed
You can prevent your credit card from being closed due to inactivity by periodically using the card to make small purchases. If the card carries a high interest rate, pay the balance in full each month.
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