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Is a card account open if it isn't activated?

By

Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert Dear Opening Credits,
I was sent a Wal-Mart credit card in the mail and I do not want it. If I don't activate it, will the account be closed?  -- Amy 

Answer for the CreditCards.com expert Dear Amy,
I can picture the scene now. There you were at the checkout line when the clerk chirped, "Would you like to open a credit card today and get 15 percent off today's purchases?" Looking down at your costly array of stuff, you immediately replied, "Sure, sign me up."

Not long afterward, you realized that another line of credit was the last thing you needed. Or that you rarely shop at Wal-Mart, so can't see the point of having an account at that particular establishment. But the card comes anyway, and you've since changed your mind. Now what?

First know that the account is active, whether you call to activate the card or not. After you applied, the store approved you for the card and that's what matters in this scenario. You're not stuck with it forever, though. Just call the company and state that you'd like to cancel the account. If you don't, it will remain open until the company eventually closes it due to inactivity, assuming you don't use the card. That could take many months or even a year or so. 

Whatever you decide to do now, your credit report is already reflecting your initial move, which was to apply for the account. It's called a hard inquiry and it's now on your credit report. Then, when Wal-Mart granted the line of credit to you, your report showed even more new information. Pull your reports now and you'll see that account being listed in the trade line section. It will indicate the date the card was issued to you, as well as the available credit limit. Had you started charging with the card, your report would also display any balance you might have and if you made your payment on time or skipped a billing cycle. 

As for your credit scores, they have been affected as well. All the financial data on a credit report is used to generate a number, and that includes open but unused lines of credit. Interestingly, having this new line can actually help improve your credit rating, especially if you're holding on to some debt. By adding additional borrowing power to your life, you expand your credit utilization ratio -- and that can make a positive difference. From a scoring perspective, the less you owe in relation to the amount you can tap into, the better. 

This is not to say that you shouldn't close the card. There's no reason to have accounts that you won't take advantage of, and having random cards can needlessly bulk up a wallet. Canceling the account won't cripple your score. As it's new and unused, closing it now will just put you back where you started. 

So let's return to that checkout line. You'll surely be there again at countless other stores and will be asked, perkily, the same question. Next time, however, politely but firmly tell the cashier that you appreciate the offer, but you'll have to go home and think about it. And then do. Some retail accounts can be beneficial because of all the discounts and deals they come with, but only if you shop there frequently and are not tempted to overspend just because you have the option to charge what you can't afford. 

See related: FICO's 5 factors: The components of a FICO credit scoreCan a never-activated card still hurt your credit?

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Published: August 28, 2013


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