Here at TPG, we’re always looking for and working toward a welcome bonus. Welcome bonuses are the best way to earn a large chunk of points or miles quickly. I typically follow a simple process: Once I’ve earned a welcome bonus, I start working on earning the next bonus. I follow this motto: Always be earning.
However, once you’ve earned that coveted welcome bonus on a card, you may wonder whether you need to keep using it, whether you can just throw it in the sock drawer or whether you should even consider closing the account.
Let’s examine whether you can — or should — stop using a credit card after earning the welcome bonus.
Can I stop using my card after I earn the welcome bonus?
This is a two-pronged answer. The simple answer is yes, but should you? No.
While you may be tempted to think, “I earned the welcome bonus, so there’s no need to use this card anymore,” that thinking can negatively impact your credit score.
If you stop using your card, your account may become inactive, which can lead to banks closing your account. From the bank’s perspective, if you aren’t using it, you may not need it. Unused accounts also don’t make money.
If you don’t use your card, the bank won’t have anything to report to credit bureaus. That means you’ll have less evidence to show that you can responsibly pay off your cards when their statements are due. This could make issuers nervous about issuing you a new card.
Additionally, if you use your credit card only to earn a welcome bonus and then ignore it afterward, you risk upsetting the bank that issued the card, which could make it difficult to get approved for future cards.
It’s also imperative to mention that if you choose to close your account after earning a welcome bonus, the issuer may claw back the points or miles you earned. You also risk the issuer blocking you from receiving future bonuses.
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A perfect example is American Express’ welcome bonus eligibility tool. It states that the bank may evaluate not just your credit score but also your past banking activity with Amex to decide whether you can earn a welcome bonus from future credit card applications. If Amex determines that you’re an undesirable customer, it can be difficult to change its mind.
If you decide not to use your card, you should still monitor your account. Since you won’t have a bill to pay, you’re less likely to notice fraudulent charges on your card.
Related: Credit card fraud: How to spot and report it
Reasons to keep your accounts active
The first and most important reason to keep your cards open is that it helps maintain a good credit score, overall credit age and credit utilization. A good credit score can help you get approved for more cards, meaning you can earn more welcome bonuses.
If the bank closes your card for inactivity, you risk:
- A poorer credit utilization: Your credit utilization makes up 30% of your credit score. It’s a ratio that shows how much of your total available credit limit you’re using. Closing a card account will lower your total credit limit available. You ideally want to keep your credit utilization ratio under 30%.
- Lowering your credit history: Your credit length makes up 15% of your credit score and will be lowered if a credit card account is closed.
These factors both play a significant part in determining your overall credit score.
Along with not reporting activity to your credit report, there are other issues you should note, like the impacts on your credit report if your account is closed.
Not only will your account stop aging (which means you won’t improve your length of credit history), but if it’s listed as “closed by issuer,” it could also leave a negative mark on your credit report that could hurt you when you apply for credit in the future.
Given all of this, it’s worth keeping your credit card accounts active to improve your credit score and increase your chances of earning more welcome bonuses. It’s also worth keeping your accounts open to enjoy your cards’ benefits.
Many cards that offer welcome bonuses come with perks like lounge access, elite status, companion certificates and statement credits. These benefits can provide hundreds and even thousands in value when used properly, so they are incentive enough to keep your accounts open. If your account isn’t active and the bank decides to close it, you lose all these valuable benefits.
Additionally, many credit cards’ travel and purchase protections only apply when you use that card for a purchase, so you may want to book your next trip or make your next purchase on one of your cards to ensure these protections kick in.
Having a credit card with travel protections is only useful if you use that card to pay for your trip, and you can’t do that if your account is closed for inactivity.
Also, to earn and redeem points and miles, your account must be open and in good standing. If your account is closed due to inactivity, you could potentially forfeit any rewards attached to that credit card.
Related: Debunking credit card myths: Does canceling a card I don’t use help my credit score?
How to keep your accounts active
If you want to keep your accounts active, just use your credit cards.
But what about working on those new account welcome bonuses? Won’t putting purchases on other cards slow down your progress toward the bonus? The easy solution is to use your card every so often to make a small purchase.
For example, on the cards I don’t regularly use in my day-to-day life, I set a calendar reminder to notify me to go buy a coffee, a pack of gum or reload my Chick-fil-A app to ensure the card stays active.
You don’t have to make big purchases; small purchases will suffice. You just want to show the bank you are using your card. And while making a charge once or twice a month doesn’t guarantee the bank won’t reduce your credit limit or close your account, it does greatly reduce the risk.
There is no standard time frame for when issuers close accounts for inactivity, as they each have their own set of rules.
Some could be shut down after just a few months, and some after a year. The simple way to prevent this is to periodically make small charges on all your credit cards.
Related: How to avoid red flags with credit card issuers
Bottom line
Once you receive the welcome bonus on a credit card, you may want to immediately move on to a new card so you can earn another welcome bonus. While you may use that first credit card less often, it’s imperative to keep your account active.
Thankfully, you don’t need to use your card frequently or for large purchases. You can drastically reduce how much you use a credit card, but you shouldn’t completely stop using it.
Related: TPG’s 10 commandments of credit card rewards