- 1 What Happens If You Don't Activate a Credit Card?
- 2 What happens if you don't use your credit cards
- 3 More stories from John Ulzheimer
- 4 What happens if you don't activate your credit card?
- 5 What Happens When You Don't Pay Your Credit Card Bill
What Happens If You Don't Activate a Credit Card?
Credit cards generally have to be activated before you can use them. However, not activating the card doesn't mean the account isn't valid. Once a credit card application is approved, the account is opened and the card is issued. If you don't want the card, you'll need to properly cancel the account to avoid fees and potential credit consequences in the future.
When you open a new credit account, whether you activate the new card or not, it's still classified as an open account in the eyes of the credit card issuer and credit reporting agencies. The credit card issuer can legally report the card to the credit bureaus each month. However, if you aren't using the card, there may be nothing to report.
Whether you activate the card or not, a hard inquiry will show up on your credit report. When you applied for the credit card, you gave the issuer permission to review your credit, which results in a hard inquiry. Although inquiries have a minimal impact on your score, too many could raise red flags. Expect the inquiry to remain on your credit report for 24 months, but it will only affect your score for the first 12 months. If there's an annual or monthly maintenance fee, you can be charged even if you aren't using the card.
A pre-approved credit card offer isn't the same as an card you didn't activate. You're free to ignore pre-approval letters without them affecting your credit.
If you receive a new card to replace an expired card linked to an established account, you'll need to close the account if you don't want to activate the card. If you don't plan on using the card, the credit card issuer can close the account due to inactivity.
If you don't like the terms or the interest rate associated with the credit card, contact the credit card issuer immediately to state that you don't want the card. You may need to send a written request, depending on the credit card issuer's protocol. Bankrate suggests asking the issuer to send you written documentation confirming the account was closed. Keep records of any correspondence with the credit card company, including a log of phone calls and letters. If a maintenance or annual fee was charged to the account, you may be required to pay that before the account can be closed. Since you never activated the card or used it, the issuer may be willing to waive the fees. After confirming the card is canceled, destroy it.
What happens if you don't use your credit cards
What Happens if I Don’t use my Credit Card?
With increased debt loads across the country, many Canadians, including millennials, have decided to start using cash and debit more. But that brings up an interesting question. What happens if I don’t use my credit card?
It really depends on our individual situation. In theory, we’ll spend less since research has found we spend less when we use cash but there are plenty of other benefits that come with credit cards that we’ll start missing out on. Using credit cards responsibly is never a bad thing but let’s take a look at what happens when you don’t use your credit card
This really depends on our individual situation. Let’s say we’ve been using credibly responsibly for a long time. That means paying our bills on time and in full every month. But then we decide to stop using credit completely. In this case, our credit score probably won’t be affected too much since we’ve already built a solid credit history. That doesn’t mean we should start cancelling our cards, we want to keep them since our credit history is still active.
On the flip side of things, some millennials don’t even bother applying for credit cards at all. Between cash and mobile debit, they believe they don’t need to bother with credit. This may sound good in theory but it could affect us in the future. If we ever need to apply for a mortgage or car loan, the lenders are going to want to see a solid credit score/history. This is a lot harder to do if we’ve never used credit cards.
If I were to ask myself, what happens if I don’t use my credit card? I would immediately think of the major benefits that I would lose. My credit card earns me travel rewards points which I’ve been able to claim free flights and hotels with. My credit card also gives me comprehensive travel insurance which saves me a few hundred dollars a year.
For those who don’t like to travel, there’s always cash-back cards. A no-fee card will earn us 1-2% cash-back on our purchases but a premium card could give us up to 4%. That’s a pretty big incentive to use credit over cash.
Don’t forget about the additional benefits
Travel credits, cash-back, and travel insurance aren’t the only benefits we may get by charging our purchases. Premium credit cards usually offer auto insurance which covers car rentals too.
Even if you have a no-fee card, there are many standard benefits. Purchase protection will cover purchases from loss, damage, and theft for 90 days from the date of your purchase. There’s also a good chance that you’ll get an extended warranty. Finally, every credit card has a zero liability policy so in case you’re a victim of fraud, you won’t be responsible for the charges.
Assuming we’ve already built up a solid credit history, there’s nothing technically wrong with not using credit cards. We would miss out on certain benefits (which are incentives to use credit) but it’s really a personal preference when it comes to our preferred method of payment.
More stories from John Ulzheimer
It’s strange, but from time to time, I get a small pop in the volume of the same question. It happened to me last week. I was asked four times on the same day about the impact of credit card account inactivity on your credit reports and credit scores.
What this probably means is someone with a much more visible profile made some statement on TV or radio and their answer wasn’t believable enough.
So let’s tackle the question at hand: how does credit card inactivity impact your credit?
The knee-jerk answer is, “it doesn’t”, but that leaves too much meat on the bone. Account inactivity CAN have an impact on your credit, but it would be indirect.
Is Your Account Active or Inactive?
Credit reporting is very flat, meaning your credit reports only show you a snapshot in time of what your credit history looks like. There is no chronology of balances, which means it’s hard to determine from a credit report if an account is active or inactive.
For example, if you have a credit card with a $0 balance on a current copy of your credit report, it appears that the account is inactive. The problem is that balance is from last month’s statement and the card may have been used since the last month’s statement was cut, thus the account is now “active.”
Because you can’t determine activity from a credit report, credit scoring models cannot be harmed or helped by your past usage activity. However, the credit card issuer’s reaction to your usage patterns can make its way to your credit reports and that’s where the game changes.
Is Your Credit Card a Stick in the Mud?
If you choose to stop using your credit card account, for whatever reason, the revenue generated by that card dries up ,unless that card has a balance or an annual fee. If the card has a $0 and no annual fee the card issuer depends on your usage in order to make money. No usage means no interchange fees (aka “swipe fees”). Add that to the absence of interest and annual fees and the card becomes a drag to the issuer.
In fact, if there is no usage, no balance, no interchange, and no annual fee, then the card drops below the $0 mark on the revenue curve. Credit card issuers incur a cost to maintain your account in their systems. They pay the credit bureaus for periodic credit reports and scores on you as part of their account maintenance practices and they spend time and energy trying to figure out how to get you active again.
There’s a cost to all of this, which is why you’re a “loss” while you’re inactive.
The Indirect Impact of an Inactive Credit Account
Eventually, the issuer is going to throw in the towel and close your account. Here’s where the indirect impact to your credit is going to occur. When a credit card issuer closes your account (for whatever reason) you immediately lose the value of the unused credit limit on that card. This means your infamous revolving utilization percentage could go up, and it could go up a lot.
The impact to your credit is going to vary based on a couple of variables. If you carry credit card debt on other cards, the impact could be significant. If the credit limit on the newly closed card was very high, the impact could be significant.
If the credit limit was very low (like on a retail store card) and you don’t have credit card debt elsewhere, the impact is likely to be almost meaningless.
If this is a concern for you, there’s a way to prevent all of this. All you have to do is use your credit card from time to time. Now, I’m not suggesting that you get into debt and I’m not suggesting that you use it to buy things you wouldn’t normally buy.
I’m suggesting that you buy a tank of gas or use it to pay this month’s cable bill, which are things you’re going to have to pay for anyway. This way you’re killing two birds with one stone.
By using the card, and then paying it off immediately, you’re resetting the activity clock and it isn’t costing you a penny in interest. The credit card issuer is happy because they’re making revenue from the swipe fee, which is being paid by the merchant, not by you.
Best of all, you protect your credit because the issuer isn’t likely to close your account if you use it from time to time, even on modest purchases.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.
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What happens if you don't activate your credit card?
If you don't activate it and the expiration date passes, it will simply be written off and it may be reissued or it may not, depending on your bank.
I had an unactivated credit card for nearly 8 months, finally got around to activating it. Works fine.
What Happens When You Don't Pay Your Credit Card Bill
Pay your bill in full, on time, every month. It’s the advice every credit card holder receives from almost every source (with the usual caveat that if you can’t pay off the full balance, please, for the love of God, at least pay the minimum due). But what if you just … don’t? Roughly 1 in 20 Americans is past due on a credit card bill, according to an Urban Institute report.
If you’re in that pool of tardy payers, know that paying one day late and one month late have very different consequences. Sean McQuay, a credit card expert for NerdWallet, helps us trace the journey from merely being late to tanking your credit.
“Most people think that late payments are immediately reported to credit agencies, but that’s not true,” says McQuay. “Consumers are protected by a number of federal mandates that a late payment can’t impact your credit score until you’re at least 30 days past the due date.”
Don’t celebrate that small victory too hard, though. Even one day late and you’ll get hit with a late fee, typically to the tune of $35 to $40. If your card has any sort of low introductory interest rate, be prepared to kiss that good-bye as well.
Though it varies a bit from bank to bank, most card issuers will report you as delinquent to the major credit reporting agencies after 30 days. That black mark will stay on your report for seven years—and be tsk tsked over by every future potential lender that reviews it. Your credit score will also take a tumble, though how much depends on how high your score was to start.
“If you have excellent credit, of 700-plus, and you’re late by 30 days, you’ll probably lose 100 points off your score,” says McQuay. “That’s substantial—even a 20-point difference can have a huge impact on what kind of interest you’ll pay on a car loan or mortgage.” Miss your payment by this much, and you’ll probably have to fork over any points or miles in the card’s reward program (most require your account be in good standing).
Credit card companies will ditch your old interest rate and apply a Penalty APR that can be as high as 29.99 percent. “That surprises people, because most don’t read the terms and conditions of the card when they sign up,” says McQuay.
You’re typically stuck with that jacked-up rate, even once you resume payments. The CARD Act of 2009 requires card issuers to reconsider a Penalty APR only after six consecutive on-time payments. Another thing that happens if you hit the two-month mark: Your delinquency is reported to credit agencies again, though subsequent missed payments aren’t likely to lower your score as much as the initial missed month.
Somewhere between three and four months, most credit card issuers will “charge off” your debt. That means they sell the outstanding loan—for pennies on the dollar—to a debt collection agency. Both the charge off and sale will be noted to credit agencies and, yup, they’ll stick around on your credit report for seven years.
You’ll also likely start to receive phone calls and mail from the collection agency, though there are laws around how much they can harass you for payment. “It’s up to the collection agency to decide how long they pursue you for the debt,” says McQuay. “If the charge off is for $100, they might give up sooner than if it was $10,000.”
While Americans in big cities may complain about how expensive the cost of living is, according to a new report, places like New York and Los Angeles don’t even come close to the expense of international cities like Singapore. As Travel + Leisure mentions, The Economist Intelligence Unit’s biannual report on the world’s most expensive cities has named the Asian city-state the most expensive place on Earth to live for the fifth year in a row. No U.S. city even cracks the top 10.
The Intelligence Unit’s survey tracks prices of 160 products and services in cities across the world, including food and drink, clothing, rent, utility bills, transportation, and more. It’s designed to help companies calculate cost-of-living analyses for employees traveling and living abroad, but it also just provides an intriguing snapshot into how the rest of the world lives, and just how expensive your next vacation might be. And, of course, it allows you to feel a little better about your own city. Next time you want to complain about your rising rent, New Yorkers, know that residents of Seoul have to pay 50 percent more than you for groceries.
The prices used in the calculations are converted to U.S. dollars, meaning that the whole thing is tied to how much the dollar is worth—if the euro is worth more than the dollar, you’ll need more dollars to buy things in Paris. A weakening dollar is one reason the report gives for the lack of U.S. cities in the top 10 list, even though American cities are becoming more expensive relative to past years. (New York, currently in 13th place, was in the 27th spot five years ago.)
Without further ado, and with our deepest sympathies to their denizens, here are the top 10 most expensive cities across the world: