If you've been wondering what happens to your credit card account if you don't use it for two years, you're not alone. Many people have the same question, especially those who have recently canceled their cards or are considering doing so. In this article, we will delve into the intricacies of credit card accounts and how they can be affected by extended periods of inactivity.
Firstly, let's understand what happens when you stop using your credit card. When a card is not used, it does not earn any rewards points or cash back. However, the card issuer may still charge an annual fee for the privilege of having the card. This fee is usually around $50 per year but can vary depending on the card issuer and the type of card. If you fail to pay the annual fee, the issuer may close your account, which could negatively impact your credit score.
Now, let's move on to the more important question: what happens to your credit card account if you don't use it for two years? The answer depends on several factors, including the terms and conditions of your card agreement, the state of your credit history, and the actions of the credit bureaus.
One common scenario is that your card issuer might convert your account to a dormant or inactive status. In this case, the account will no longer appear on your credit report, and any balance on the card will be considered as a closed account. This means that the debt will not affect your credit score, and you won't be able to access the funds unless you reactivate the account or apply for a new one.
Another possibility is that your card issuer may report the account to the credit bureaus as "closed," which would result in a "closed account" entry on your credit report. This type of reporting can potentially harm your credit score, as closed accounts can lower your overall account age and average account age ratios. However, some credit card companies may choose to report the account as "inactive" instead of "closed," which has less of an impact on your credit score.
It's also worth noting that if you have a zero balance on the card, the issuer may not report the account to the credit bureaus at all. In this case, the account will simply disappear from your credit report, and there will be no impact on your credit score.
In some cases, if you have a balance on the card, the issuer may report the account as "charged off." This means that the issuer has given up trying to collect the debt and has reported it to the credit bureaus as a negative item on your credit report. A charged-off account can significantly lower your credit score and increase your debt-to-credit ratio.
Lastly, if you decide to reopen the account after two years, you may need to apply for a new card with a new account number. This process can take some time, and during that period, you may not be able to use the old card number for transactions. Additionally, if you had a balance on the card before closing it, you may need to pay that balance before the new account is activated.
To avoid any potential issues, it's a good idea to keep track of your credit card activity and make sure to pay your bills on time. If you plan to stop using your card for an extended period, consider contacting your card issuer to discuss options such as closing the account or setting it up for automatic payments.
In conclusion, the consequences of not using a credit card for two years depend on various factors, including the card issuer's policies and your credit history. It's essential to stay informed about your credit card accounts and take proactive steps to manage them effectively. By understanding the potential impacts of inactivity, you can make informed decisions about your credit card usage and maintain a healthy credit score.