What is a Dormant Credit Card Account

A dormant credit card account is one that hasn't been used for a specific period, which varies amongst banks. Some banks may consider your account dormant after 6 months of inactivity, while others may wait up to 12 months. 

 

During this time, if you don't make any transactions, your bank may label your account as inactive. If inactivity continues beyond this period, the bank might deactivate or close your credit card account, meaning you can no longer use it. 

A credit card is dormant when it is not in use for a longer period of time. When you don't make any transactions, like purchases, payments, or cash withdrawals, your bank may classify the card as dormant. This means the card is still valid, and using it for a transaction can reactivate it. 

 

Besides, it's important to know that a dormant credit card is different from a closed credit card. A closed credit card is no longer active, so you can't use it. But a dormant credit card stays open, and you can reactivate it by using it again.

A dormant credit card account may not seem like a concern, but it can affect your credit score and finances in different ways.

 

Here are some implications of a dormant credit card account:

Account Closure

If your credit card is unused for an extended period, the bank might close it. This can lower your credit score, as it reduces your total available credit and shortens your credit history.

Impact on Credit Score

Some banks may charge fees if your credit card remains inactive for too long. These charges could be annual or apply after a certain period of inactivity. Checking your card’s terms and conditions can help you avoid unexpected fees.

Fraud Risk

Not using your credit card regularly may make it harder to spot unauthorised transactions. Banks usually require fraud claims to be reported within a certain time, often 30 days. If you miss this window, you may be held responsible for fraudulent charges. It’s important to check your statements regularly, even if you don’t use the card.

Loss of Rewards and Benefits

Many credit cards offer rewards like cashback, points, or travel perks. If your card remains inactive for too long, you may lose these benefits. Some card issuers also provide bonus rewards based on your spending habits. If your account stays dormant, you could miss out on earning these extra rewards.

Banks mark a credit card as dormant to reduce potential risks and improve efficiency. Inactive accounts are more susceptible to fraud, so marking them dormant helps prevent unauthorised transactions. 

 

Additionally, managing active accounts requires significant resources, so banks prefer to focus on accounts that are in use. Typically, if there's no activity on your credit card for 12 to 24 months, the bank will flag the account as dormant. 

 

Most banks will notify you before doing this, often through email, SMS, or a formal letter. This gives you the chance to reactivate the account by making a transaction or contacting the bank, if needed.

Banks may deactivate your credit card if you don't use it for a certain period, which varies by institution. Some banks may deactivate a card after six months of inactivity, while others may wait up to twelve months. 

 

Before deactivating your card, issuers usually notify you and give you a chance to reactivate it by making a transaction. If maintaining your inactive account becomes more costly than the revenue it generates, the issuer may decide to deactivate your card and mark the account as dormant.

As a customer, you might consider deactivating your credit card under certain conditions to avoid unnecessary charges and manage your finances better. 

 

Here are some situations where closing a credit card account could be beneficial:

• If your credit card comes with a high annual fee that outweighs the benefits you receive, it may be wise to close the account to save money.

• If you own several credit cards that you no longer use, you can complicate your financial management. Deactivating these unused cards can simplify your finances and reduce the risk of potential fraud.

• Some banks issue more than one credit card with the same credit limit. In such cases, deactivating one of the cards can help you manage your credit more effectively.

• If you're struggling to pay off a large outstanding amount on your credit card, consider opting for a balance transfer to a card with a lower interest rate and closing the old account. This can make debt repayment more manageable.

• Before deactivating any credit card, ensure you've paid off any outstanding balance and redeemed any accumulated rewards. 

Ignoring a dormant credit card account might seem harmless, but it can significantly affect your credit score and financial health. A portion of your credit report is based on the length of your credit history. Closing an old, unused credit card can reduce your overall credit age, potentially lowering your credit score.

 

Additionally, your credit utilisation ratio reflects the percentage of available credit you're using. If a card issuer closes your dormant account, your total available credit decreases. This can raise your credit utilisation ratio, which may hurt your credit score. You should therefore keep your credit utilisation below 30%.

 

Besides, you can also opt for a diverse credit mix that can positively influence your credit score. Credit card mix refers to the variety of credit types you have, such as credit cards and loans. If a dormant credit card account is closed, especially if it's your only credit card, it could negatively impact your credit mix and, consequently, your credit score.

 

To maintain a healthy credit score, using your credit cards, even for small purchases, can help keep your accounts active and your credit score in good standing.

A dormant credit card account is an account that just is not in use anymore. You can revive it just with a single transaction. You can make any purchases or bill payments to show the transaction, and signal the card’s issuer an activity has been done on the card. 

 

Additionally, you can also follow the steps given below for reactivating a dormant credit card account:

1. Reach out to your bank through their customer service channels or visit the nearest branch

2. Express your intent to reactivate your dormant credit card

3. Provide a written request to the bank, highlighting your good credit history and timely EMI payments

4. Submit self-attested copies of your Permanent Account Number (PAN) card, identity proof, and address proof as part of the bank's Know Your Customer (KYC) requirements

5. After submitting your request and documents, use your credit card for any type of transaction, signaling the activity on the account