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Credit Cards help you manage everyday expenses, build credit history and enjoy various perks and rewards. However, you might have some Credit Cards that you rarely use or might have tucked away. These cards can be at a high risk of becoming dormant. It's important that you understand what is a dormant Credit Card and its implication.
What is a dormant Credit Card?
A dormant Credit Card refers to a Credit Card account that has remained inactive for a long period, usually ranging from six months to a year (varies from bank to bank). Inactivity means no balance transfers, purchases or cash advances. It can be due to various reasons, like switching to alternative payment methods, paying off balances, forgetting about the card, or simply not using it for an extended period. Interest credits or debit of maintenance charges are not considered transactions in such situations.
Card issuers usually inform you before deactivating your card and give a few days to reactivate it. After a point, the costs incurred to maintain your account go beyond any revenue generated, and that's when the issuer declares it dormant. Banks maintain separate ledgers for dormant accounts. This is done in an attempt to reduce fraud risks related to Credit Card usage.
Consequences of dormant Credit Cards
1. Positive consequences
- Maintained credit history: Keeping a Credit Card account open, even if it's dormant, can help maintain a longer credit history, which is beneficial for your credit score
- Available credit: The credit limit on the dormant card adds to your overall available credit, which can improve your credit utilisation ratio
- Emergency use: In case of emergencies or unexpected expenses, a dormant Credit Card can act as a backup
2. Negative consequences
- Inactivity fees: If you don't use your card for an extended period, some issuers may include inactivity fees in the Credit Card charges.
- Account closure: Credit Card issuers may close dormant accounts due to inactivity. This can affect your credit score, especially if the closed account had a long history and a high credit limit.
- Loss of benefits: If your Credit Card earns rewards, such as cashback or points, not using the card means missing out on potential rewards.
- Security risks: Dormant Credit Cards might not be monitored as closely as active ones, making them more vulnerable to unauthorised transactions or fraud.
Reviving dormant Credit Card accounts
If Axis Bank has declared your Credit Card dormant, you can visit the bank to reactivate it. You might have to make a formal request in writing to the bank and mention how you have paid all your EMIs and maintained a good credit history. You will need to submit copies of your PAN card and an address proof for KYC. Once the dormancy is removed, you will need to make a transaction.
Also Read: How to use a Credit Card effectively and smartly
Conclusion
Dormant Credit Cards are common but shouldn't be ignored. When you reactivate your dormant Credit Card and do not intend to close it, you can take a few steps to avoid dormancy in the future. For instance, you can set up monthly payments to keep it active. You can also change to low-fee cards with minimal joining and annual fees. Check out the range of Axis Bank Credit Cards and select one that matches your requirements.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
