We spend a large amount of time talking about credit cards. We find out what the best sign up bonuses are. We know which card is the best to use for each bonus category. Watching email for bonus spending offers and even figuring out the cards to use when buying gift cards for manufactured spend.
After taking such care to pick out cards, the last thing we want is for a bank to cancel a card we want to keep. But that’s exactly what happened to fellow blogger Island Miler when Citi closed his Double Cash card.
Why did the bank close his card?
There are plenty of reasons for a bank to close a card that you can think of. Not paying your bills, lying on your application, fraudulent activity come to mind. Sometimes a bank stops offering a card and gives you no option to convert to a different card.
More often than you’d think, the reason a bank closes a card is just that the customer stopped using it. Inactivity is a valid reason for a bank to close your account. And get this, they have no requirement to tell you in advance. The only way you’ll find out is that you’ll get a letter advising you of your closed account.
We’ve had this happen to us. Sharon used to have a Mastercard since from when she was in college. I knew she had it but it sat on her desk for years. I tracked down that the account was bought through mergers by Capital One. When I called them to see what card Sharon has with them, they said the account was closed. They mailed a letter, which was returned as non-deliverable (our fault because we never changed our address on the account).
Do you have regret about not being able to use a card you weren’t using? I’m not sure. However, if that account has a long history and helps you with your credit score, you don’t want to see it closed.
What Can You Do?
The obvious answer is that you need to use your credit cards. Leaving them inactive makes them fair game for closure.
How often do you need to use a card to keep it active? There’s no hard and fast rule that banks publish. Previously, you could easily go for a year or more with no purchases without worrying.
But things have changed. I have no doubt that banks are going to look to tighten up their balance sheets. Giving plenty of credit to people when the economy is good has almost no risk. Banks use your credit score to issue new credit and those scores reward you for having more credit than you’re using. Nice program they have there if you think about it.
When the economy goes bad, people start using those forgot about lines of credit for things like groceries, bills and whatever else they need. Banks now see those accounts as riskier because unemployment is up and incomes are down. Credit scores start to drop as credit utilization goes up. One way for banks to prevent people from using those cards sitting in the drawer is for them to close the inactive accounts.
While I used to shoot for at least one purchase a year, I’m now trying for one every six months. Some websites say three months but I think that’s unnecessary. Banks will take the oldest inactive ones first.
Use those old cards for something small. Add $10 to your Amazon account. Make a donation (if you can) to any of the worthy charities doing work for those in need. Buy some food or coffee and get it delivered to a local hospital. Pay for your Netflix or Disney+ subscription.
If you have a recurring subscription, you could put that on the card. My big problem with that solution is then you have to remember to pay the bill every month. You could set up auto-pay but for me, that’s too much trouble for a card I don’t care about.
Final Thoughts
After reading Island Miler’s post, I went and looked at my accounts. I have at least two where it’s been over a year since I charged anything. I pulled out the cards from my drawer and used them to pay for some non-bonused transactions. That should keep me good for a while.
When you have a large number of cards, it gets difficult to keep track. If you have some that you just keep in a drawer, It may be a good idea to keep a list of the last time you used them just to ensure the bank doesn’t drop you for inactivity.
#stayhealthy #stayathome #washyourhands
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This post first appeared on Your Mileage May Vary
1 comment
I had 26 cards at one time and have now cut down to 15, It can be tough remembering to do a spend on each. I will say though that personally I have never had a card closed for inactivity without them first notifying me and giving me a me a month of two to use the card and avoid it.
Of course if you don’t keep them updated with a current address that notice doesn’t help,