What is a Credit Card Dormant Account?

Posted on Thursday, August 22nd, 2024 | By IndusInd Bank

Have you ever stumbled upon an old credit card that was untouched for months? It may be what’s known as a ‘dormant credit card’.

While it might seem harmless to let a credit card sit idle, understanding the implications of a dormant credit card account is crucial for maintaining a healthy financial profile. Read on to know more.

Understanding Dormant Credit Cards

• A dormant credit card refers to a card which a cardholder has not used for an extended period. 

• When a credit card remains inactive—meaning there are no transactions, payments, or cash withdrawals for a specific duration—banks may classify the account as dormant. 

• The inactivity period for a credit card to be marked dormant varies between banks. 

• Note that a dormant credit card differs from a closed credit card. A closed credit card is no longer active and, hence, one cannot use it. However, a dormant credit card remains open and one can reactivate it. 

• Reactivating your dormant account can involve a formal request or transacting with the card.

When and Why do Banks Mark a Credit Card Account as ‘Dormant’?

• Banks mark a credit card dormant to reduce potential risks and have better efficiency. 

• Inactive accounts are more susceptible to fraud. By marking an account dormant, banks can reduce the risk of unauthorised transactions.

• In addition, managing active accounts is resource intensive. Banks prefer to focus their resources on accounts that are used.

• The bank will flag the account as dormant if there has been no activity for a specified period, such as 12 to 24 months.

• Most banks will notify you before marking your credit card dormant. This notification may come via email, SMS, or a formal letter. This allows you to reactivate the account by transacting or contacting the bank, if required. 

Should You Close Your Dormant Credit Card Account or Reactivate It?

The decision to close or reactivate a dormant credit card depends on individual circumstances and financial goals.

• Closing a dormant credit card account can be beneficial if:

1. You are trying to avoid overspending.
2. The card has a high annual fee that you no longer wish to pay.
3. You are aiming to simplify your finances and manage fewer cards.

However, closing a credit card account can impact your credit score, especially if it is a card with a long and positive history. 

• Reactivating a dormant credit card can be a good option if:

1. You want to preserve your credit history.
2. You are not ready to lose the account.
3. You are expecting the need for credit in the future.
4. The card aligns with your current financial needs and spending habits. 

• If you choose to keep a credit card dormant, it is crucial to:

1. Keep track of the account and remember the card details and any associated fees.
2. Check your credit report at regular intervals to ensure the account is reported accurately.
3. Be aware of potential inactivity fees. Some banks might charge fees for dormant accounts.

Also Read: A Deep Dive into the Credit Card Expiry Date

Conclusion

Managing a dormant credit card requires careful consideration of its impact on your credit score and financial goals. Whether you choose to close an inactive account or let it remain dormant, make informed decisions that align with your financial goals and risk tolerance. 

It is easier to keep a credit card active when it offers UPI-linking features and high rewards on each transaction. With the IndusInd Bank Platinum RuPay Credit Card, you can link your credit card account to UPI and earn exciting reward points.

With each UPI transaction of ₹100, you earn 2 reward points. For every non-UPI transaction of the same amount, you earn 1 reward point. The best part? These rewards never expire! 
So, what are you waiting for? Apply now for an IndusInd Bank Credit Card now! 

Disclaimer:

The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.