Credit cards are used all over the world, and the Gulf nations and the United Arab Emirates are no exception.
Credit cards are in constant use, helping to provide financial assistance during emergencies as well as being more convenient to carry than physical money.
Many people apply for a credit card and then simply never feel the need to actually use it.
However, when a credit card is unused for a long period of time, there can be unexpected downsides to this period of dormancy, including a negative impact on your credit score.
There may be a number of reasons why a credit card is left unused in the UAE.
People may decide that the rewards on those cards do not provide enough benefit to justify their use on a regular basis.
Some people may have multiple cards and prefer others, while some apply for a credit card solely in case of emergency, only to end up never needing it for such a reason.
Many people feel that owning a credit card gives them an asset that they don’t have to use.
However, if a credit card is not used for a long period of time, the account may simply be shut down by the bank or credit card company with no warning.
If this happens, you may even only find out about it when you try to use the credit card, and there will also be a big impact on your UAE credit score.
The reason why a credit score is negatively impacted by the closure of a credit card account is that your utilisation rate from all available sources of credit makes the score, meaning that it would be reduced by an involuntary account closure.
This reduction can also damage the whole of the credit report and affect your future chances of being able to get a loan at a later date in the event of an emergency.
It is, therefore, a good idea to not leave any credit card inactive and to actually cancel any card that you feel is no longer necessary.
The voluntary closure of a long-standing credit card account may have some negative impact on your credit score, but this is still better than leaving such an account inactive for a long period of time in the UAE.
There are, however, some instances where such inactivity may not affect your credit score, such as when a strong credit history has already been built using the card, with the bills having always been paid on time and in full.
The other downside to not using a credit card for a long time is that you will still be left paying annual fees on cards you no longer use.
You will still have to pay interest on balances charged prior to your lack of usage.
However, if you have no outstanding balances, this will not be the case, and you will also be able to close the account without further charges.