Here's What Happens if You Never Cancel a Credit Card

If you have a credit card gathering dust, here's what to expect.

From time to time, you may find that you have a credit card you're just not using anymore. This often happens after people improve their credit scores and get better cards with more benefits. For example, if you have a cash back card, it doesn't make much sense to keep using an old card that doesn't earn any rewards.

You could cancel the old card, which is what a lot of people do in this situation. But closing a credit card can impact your credit score, so you might prefer to keep it. What about if you simply stop using a card but never cancel it? Let's go over what could happen in this situation.

What happens if you never cancel a credit card

If you never cancel an unused credit card, there are two possible outcomes:

• The card issuer cancels the card. Card issuers will usually send a notification in advance of the pending cancellation. The notification will let you know that if you don't use your credit card by a specific date, it will be canceled.
• Nothing changes. That's right. Your credit card could just remain open, despite the lack of activity.

The most likely scenario is the card issuer notifies you by letter or email that it plans to cancel your credit card. If you want to prevent that, you'll need to make a purchase by the date in the notification.

The amount of time that can pass before you get this type of notification is anybody's guess. It could take six months of inactivity, a year, or five years. While card issuers don't make their timelines public, Wells Fargo has at least provided a general idea of its cancellation policy. A spokesperson told Money that Wells Fargo generally closes credit card accounts after two to three years of inactivity.

But why keep a credit card open if you're not using it? The main reason is the way this can affect your credit score.

How a canceled credit card affects your credit score

A canceled credit card doesn't directly impact your credit score -- you don't lose points because your card was canceled. But it can influence a few of the factors used to calculate your credit score.

The biggest potential issue is how it affects your credit utilization ratio. This is one of the most heavily weighted factors in your credit score. To determine your credit utilization ratio, your card balances are divided by your credit limits. Let's say you have two credit cards:

• Card A has a $5,000 balance and a $10,000 credit limit.
• Card B has a $0 balance and a $10,000 credit limit.

Your credit utilization would be your $5,000 in balances divided by your $20,000 in combined credit. That's 25%. Conventional wisdom suggests having a credit utilization below 30%, so you'd be doing well.

But now let's say that card B gets canceled because you never use it. You'd lose $10,000 in credit. Your credit utilization is now $5,000 divided by $10,000, which is 50%. Because that card was canceled, you now have high credit utilization that could hurt your credit score.

This is only an issue if you carry large balances on your credit cards. If you pay your bill in full, then credit utilization won't be an issue, even if a card gets canceled.

Another downside that gets mentioned often is that a canceled credit card could reduce your average account age. However, this isn't as big a deal for two reasons:

• Closed credit cards remain on your credit file for 10 years. During that time, they can continue to positively affect your credit.
• Your average account age is a minor factor in your credit score. Under the widely used FICO® Score system, it counts for 15%. Credit utilization, on the other hand, counts for 30%.

Keeping a credit card open

If you want to make sure a credit card stays open, that's easy enough. Use it for the occasional purchase, and pay the bill on time. One popular way to do this is making your card the default payment method on a regular bill you have, like your streaming service account.

Now, is this worth your time and energy? Probably not. Any impact on your credit score from a canceled card is fixable, and it won't be much if you're able to keep your credit utilization low.

You're better off finding quality credit cards you like and will use regularly. Ideally, you'll pay your credit card balances in full every month, too. It's good for your credit utilization, and you won't get charged credit card interest. Do that, and you won't need to worry if an unused card gets canceled.