Not using your credit card? Here's how it can affect your credit score

Credit card usage is currently very high. Everyone with a bank account has a credit card. Experts say there are a few things to keep in mind when using credit cards. 

Image Credit : freepik

Increased Credit Card Usage

Credit card use has increased recently, from daily needs to luxury expenses. Many get credit cards for discounts and cashback on dining, travel, movies, and shopping. Having multiple cards is common. Some keep cards unused, intending for emergencies. What happens if a credit card is unused? Are there any downsides? Let's see.

Image Credit : freepik

What Happens If You Don't Use Your Credit Card?

Banks typically keep inactive credit cards active for 12 months. They'll inform you before closing it. After expiry, cards are canceled with a 30-day notice, per RBI guidelines. If you don't plan to use a card, contact your bank to close it. Unused cards may incur maintenance or late fees, impacting your credit score.

Image Credit : Gemini

How to Keep Your Credit Card Active?

Use your credit card at least once a year, even for a small amount like a ₹100 mobile recharge. This keeps it active. Note: paying interest or late fees isn't a transaction. Auto-debits and EMIs might not count either. Make a small manual payment annually.

Image Credit : Gemini

Does it Affect Credit Score?

An unused but active card doesn't directly affect your credit score. However, closing it can change your Credit Utilization Ratio (CUR), impacting your CIBIL score. Use at least 30% of your credit limit annually.

Image Credit : iSTOCK

How to Close a Credit Card?

Close high annual fee cards if not needed. Ensure zero outstanding balance and interest. Officially close it via customer care or in writing at a branch. Get confirmation via email or SMS. Check your CIBIL report after 30-45 days. Using your card responsibly and paying on time improves your credit score.