What can happen if you don’t activate your credit card

Quick insights

• Credit cards typically need to be activated to be used, and failure to do so could potentially have consequences.
• In addition to an inability to use the card, a decision not to activate a credit card could increase the potential for fraud, lead to the forfeiture of welcome bonuses and indirectly impact your credit score.
• Due to the possible negative consequences that might accompany a failure to activate a credit card, you might want to wait to apply for a new card until you’re ready to activate and use it.

While not activating a credit card might not carry serious financial consequences, understanding the potential implications can help you make informed decisions about managing your credit.

What happens when you don’t active a credit card

When you receive a new credit card, you're usually required to activate it before you can use it. If you don't activate the card, several things can happen:

• Inability to use the card: Some credit card issuers won't let you use the card until it's been activated. This means you won't be able to make purchases, get a cash advance or do anything else that requires the card to be active. You’re also unable to reap any of the benefits associated with your card, such as travel benefits and rewards.
• Account remains open: Even if you don't activate the card, the account is still open. This means it can still be charged fees, such as an annual fee, if applicable.
• Potential for fraud: If you don't activate the card and it's lost or stolen, someone else could potentially activate and use it. However, most credit card issuers have safeguards in place to prevent this.
• Welcome bonus: Many credit cards offer a welcome bonus to new card members. These welcome bonuses frequently include a minimum spending requirement to receive the bonus. The minimum spend typically needs to be met within a set time limit, usually three months, so failure to activate your credit card makes it more difficult to reach the bonus’ minimum spend requirement in time.

How not activating a credit card can impact your credit

Not activating a credit card might not directly impact your credit score, but it could have the following indirect effects:

• Age of credit: The age of your credit is determined by the average age of all your credit accounts. When you open a new credit card account, it can lower the average age of your credit, even if you don't activate the card. A lower average age of credit can negatively impact your credit score. As such, if you don’t plan to use the new card, it might not make sense to reduce the average age of your credit by opening a new account.
• Payment history: If your new card has an annual fee, the issuer may charge the fee even if you don't activate the card. If you forgot about the annual fee and don't pay it, it could result in a late payment being reported to the credit bureaus, which can negatively impact your credit score.
• Credit utilization ratio: Your credit utilization ratio is the amount of credit you're using compared to the total amount of credit you have available. If you don't activate a credit card, the credit limit of that card still contributes to your total available credit. This could actually help improve your credit utilization ratio. For example, if you previously had $5,000 of available credit and $2,000 in debt, your ratio is 40%, which is considered high. But if your new credit card adds $3,000 to your credit limit, this would bring your utilization ratio down to 25%. It is typically recommended to aim for a credit utilization ratio of 30% or less, with 20% or less considered ideal.
• Number of open accounts: The number of open accounts you have is a factor in your credit score. Even if you don't activate a credit card, the account is still considered open and can impact your score.
• Account closure: If an account remains inactive for several months or years, the lender might close it. Account closure could impact your credit score, as age of credit is one of the factors that go into calculating your credit score. You might consider making at least one or two purchases each year in order to avoid account closure and the corresponding potential credit score impact.

Bottom line

Not activating your credit card might, in some cases, have an impact on your credit score and financial situation. Beyond an inability to use the card for purchases, not activating your card might potentially lead to the closure of the account due to inactivity. It can be beneficial to activate any new credit cards and ensure they are included in your financial management strategy