In the digitally driven modern times, using credit cards to make payments for various expenses has become a routine for most people. However, there are still a large number of individuals, who feel sceptical about the using their credit cards too often. While they understand the fact that active usage of their cards is necessary to keep their associated bank accounts open, they are not aware of its importance in other ways.
For one, active usage of the credit card ensures that the providers continue informing the credits bureau about the card activity. This can play a vital role in helping the card users build a good credit score. However, an inactive or even minimally active credit card prevents the service provider form sending any updates to the credit bureau. This leads to the associated account having a lesser impact on the credit score of the cardholders.
Recommended Frequency of Credit Card Usage
In general, it is advisable to use the credit card at least once every month. However, this frequency recommendation might vary according to the type of card and the provider offering the credit services. In case of individuals owning multiple credit cards, dividing them into groups and then using them in a rotational manner is the best way to keep all of them active. Discussed below are some important aspects that should be considered for ensuring most beneficial card usage.
1. Consider The Credit Utilization Ratio – One of the biggest reasons behind the ever-growing popularity of credit cards is the availability of a generous credit limit. However, it is highly advisable for the card owners to spend an amount that is just below 30% of their available credit limit for each month. Piling up credit with the hope of paying it off by the end of the month is definitely not a smart move. Instead of helping in enhancing their credit score, spending up to their maximum card limit, actually presents the card owners as reckless users of this facility. In order to get a good credit score, it is essential to maintain the credit utilization ratio at a minimal level, which can be ensured by spending a minimal percentage of the available credit limit.
2. Timely Balance Payment – Most card owners believe that carrying forward some debt every month is essential for having a good credit. However, this is entirely false and most financial experts advise against such bad practice. Rather, they stress the importance of making the credit card bill payments in full at the end of each month. This ensures that the card owners have a credit utilization ratio of zero percent and enables them to keep charging for small expenses. It is advisable for the card owners to spend only that amount which they can pay off in full at the end of the month and if needed can opt for payday loans online to pay off their debt quickly. The advisable amount is less than 30% of the credit limit.
3. Ensure Enough Credit Card Activity – Owning a credit card but not using it enough is surely not going to prove beneficial for the card owners. In fact, many service providers tend to charge a fee from the customers with inactive cards. In addition, they might even choose to slash the line of credit of such customers although they might not completely close down the account. However, even the other two options need to be avoided as it might impact the credit score of the card owners in a negative manner. It is also not a good idea for people to completely give up credit card usage even when they are facing credit issues.
Can Card Owners Expect to Receive Inactivity Warning?
It is not uncommon for credit card owners to feel justified about expected an inactivity warning from their service providers. However, most providers do not bother to inform their customers about the possibility of their credit account being closed due to minimal card usage. In fact, they do not even notify the customers about not sending any more updates to the credits bureau about their credit activity, due to lack of the same.
This is because the credit services providers are not obliged to provide any such warnings or notifications to the customers. The best they can do is to send an official account closure letter after the process has been completed. The only way that the card owners can check the validity of a card that has remained unused for long is by trying to pay for a purchase with it. Alternately they can call up the customer service or their credit card to seek confirmed information about their card status.
The Word of Caution
Just because it is essential to keep their credit card active, does not mean that the card owners should go on spending spree. Even something insignificant as paying for a bottle of water or a monthly subscription or even availing an emergency cash loans, using the credit card is enough to keep it active.