Capital One Closing Inactive Credit Cards

It seems just moments ago that credit card companies were continually thrusting offers at us like pistons in a car engine. Now they’re trying to lower their risk exposure, by limiting people’s access to credit, raising APRs, and closing down credit cards, like reader Rachael’s card that she hadn’t used in seven years. I guess they’re worried that people in financial trouble are going to start pulling out those unused credit cards, max ‘em out, and default on the debt. What this means, though, is the Rachael and people like her could start seeing their credit scores drop, as length of credit history is a factor in determining your credit score. Capital One’s kiss off letter is after the jump.

After conducting a periodic review of our existing accounts, we noticed that you haven’t used your Capital One credit card in the past 36 months. Because of the recent lack of activity, we’re letting you know that we have closed your credit card account.

If you have attempted a transaction in the past few days, it may have been declined due to the closing of your account; we apologize for any inconvenience this may have caused. If you have an outstanding balance, please continue to make payments until the outstanding balance on your account reached zero.

Maybe you originally wanted to have a Capital One card in your wallet in case of emergencies. If that’s the case, we’re thankful you didn’t require our services. Perhaps you’d still like to carry a Capital One card – just in case. Please know you’re always welcome to apply for a new account. Simply visit us online at http://www.capitalone.com

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  1. JonThomasDesigns says:

    Everyone knows that you have to use it every few months to keep it going

  2. IphtashuFitz says:

    Let me get this straight. On one hand a credit card company can close your account if you don’t use the card, but on the other they will open an account that YOU closed if some merchant makes a charge against that account. Nice double standard…

  3. Nate425 says:

    They’ve been doing that for years. i got one probably 8 years ago after I hadn’t used my card at all since leaving college.

  4. parnote says:

    LOL … perhaps they could save themselves a TON of money by NOT sending me (on average) 3 to 5 offers for their credit cards every week! Those offers do not go to waste, however. The “fake” cards they send get used as emergency, one-time-use window scrapers when we have frost on the windshield, and the BULK paper part goes into the fireplace to be used as fire starter material.

  5. Dr_Doofus says:

    I got one of those too. I wonder how “account closed by issuer” will affect my credit score.

  6. differcult says:

    They have every right to do so….even more so if she isn’t using it.

  7. LuvJones says:

    I’m sure that new account will have a higher rate as well.

  8. robyns says:

    @parnote: That is a great way to make use of those annoying fake cards! I used to take the time to tear up CC offers and mail them back on the company’s dime, but that got old after a while.

  9. chemmy says:

    @jonthomasdesigns:

    I don’t know about that. I have a few in my wallet that never get used – they just keep sending me new ones when they expire…

    I like the part where they remind you to pay off your balance if you owed one when they closed it on ya…

    So you’re obviously using it or have used it if there’s a balance… But they’re shutting the door on you.

  10. jpdanzig says:

    Hmm… Citibank just closed my inactive card account.

    How rude!

    I guess it’s part of the pattern you describe.

  11. Shadowfire says:

    There’s a bit more of a serious question here… your credit score is partially determined by your length of credit. Doesn’t this negatively impact her score?

  12. kingofmars says:

    @Dr_Doofus: I also got that letter, and I wondered the same thing. Maybe Capital one isn’t doing so well. Nobody seems to be using their credit cards.

  13. Televiper says:

    I have a parked Capital One card as well. But, I am in Canada and perhaps the monthly payment of $50 is enough for them to keep it active. If they were going to cancel it I would hope they’d send me a courtesy mailing first. Now, it’s possible in this case that they did, but it wasn’t apparent to the O.P. I don’t really read the literature that comes with my bill. I just look at the balance and the interest rate (Amount owing is always 0).

  14. Opie says:

    The reason for keeping the card at all seems wierd to me. Whenever I check my credit report, it includes all credit cards I’ve ever had going back to 1981 (when I got my first card and have since canceled it). Canceling a credit card doesn’t seem to remove it from your credit history, so keeping a card that you don’t intend to use open for that reason seems to be bogus.

    However, keeping it open does help your credit used/credit available ratio which might be of benefit to her credit report if she tends to keep high balances on the cards she uses.

  15. chrisjames says:

    This brings back old memories of what I thought of credit cards. I always wondered how it was that banks could be so picky about loans, even small ones, to minimize risk and maximize profit, yet credit cards practically throw themselves at people despite the fact that they are high-risk loans. It’s clear now where and how they get there massive profits, but they’re still selling high-risk loans willy-nilly.

    Nowadays, I charge. No time to think when there’s stuff to buy.

  16. MissTic says:

    Very shrewd! They can simply charge you an even higher interest rate and/or give you a lower starting balance when you re-apply if you choose to do so after getting this kiss-off letter. Never underestimate their craftiness. Damn you Craptial One.

  17. bvita says:

    C’mon guys. Stop your whining. I’m no fan of any credit card company but be realistic.

    Keeping an account open costs them money. Unless they are charging an annual fee or a monthly maintenance fee (both of which would cause this group to have a cow), an unused account is a money loser for them.

    Unused cards with wide open lines are prime candidates for fraud. Gee, I found this wallet and there’s a Capital One card with a $5K line on it…

    Closing a $0 balance account should actually benefit the customer. One of the things that drags down your credit score is having a huge amount of available credit with respect to your income. Even if you don’t use that $5K line (or whatever it is), it is added to the the available credit on all of your other cards giving you enough available credit to hang yourself. If you lower that potential, your credit score should be a bit higher.

    I agree that Capital One is no Santa Claus but in this case I have to agree with them (holding my nose as I write this).

  18. azntg says:

    @bvita: Active cards with wide open lines are also prime candidates for fraud too. Credit cards simply aren’t a “secure” method of payment. By law (and with some degree of courtesy), the consumer is reasonably well protected, but the entire industry is not the way cards work right now.

    And unfortunately, you are absolutely incorrect about how closing a $5k line will increase credit scores. Maybe in your books and to a certain degree, general common sense will dictate that too…

    But FICO scores will not agree with you. As a matter of fact, FICO scores (the real ones that banks and creditors use, not the “fake” types easily available to consumers) will actually reward low utilization and high available credit lines. Currently, there is no “point deduction” for inactive cards, although according to speculation, that will change in the near future.

  19. Coelacanth says:

    @bvita: Your income is not reflected on your credit report. However, having a large cushion of available credit is generally a very positive factor.

    Let’s be serious, here. Capital One tends to be exceptionally stingy with alloting credit limits, and $5K really isn’t a large line in the industry.

  20. ryangee says:

    @bvita:

    There isn’t such thing as “too much credit”.

    [www.bankrate.com]

  21. rbb says:

    If they f*ck with my 860 credit rating by deleting any of my CC accounts, I’m going to be p*ssed

  22. Televiper says:

    @ryangee:

    There is such a thing as “too much credit.” When the bank considers giving you a loan, or a line of credit they look at your credit score, and your ability to service your debt. The question is, if you rack up that $5000 limit tomorrow, can you still pay your bills?

  23. @bvita: “Keeping an account open costs them money.” <–Bullshit, or rather, only because they waste money on unnecessary mailings and such for open-account holders. The account simply sitting there doesn’t cost them anything, and in fact it can make their books look *better* to be able to say they have more customers.

    Also,

    “Closing a $0 balance account should actually benefit the customer.” <–Bullshit x2 DOUBLE SCORE!! That depends on your circumstances; if your overall amount of credit isn’t, say, double or triple your annual income, having available credit is GOOD for your credit score. (Ask any mortgage broker if you should close your “empty” credit cards before you refinance, and they’ll say NO, LEAVE THEM OPEN IT HELPS.)

    I also disagree that they have any sort of “right” to close your account simply because you’ve chosen not to use it for now. It doesn’t say anywhere in my agreement with them that I have to use the account a certain amount, ergo it’s my choice, and for them to arbitrarily decide to penalize me for it is stupid and wrong.

    (Also, I have such an account, that I haven’t used in forever, but I’m getting ready to use it this week. If they closed it, they’d miss out on several thousand dollars from me…not real bright, that.)

  24. Does’nt this end up hurting your credit-worthiness? I’ve always been told it’s better to have X-amount of credit available with a zero balance. This shows you are responsible enough to not have a big balance and are’nt so quick to burn any balance. I’ve also understood that if you DO have a balance it’s good to use a Zero balance card on say, 500 dollars worth of purchases….immediately pay 250 then when you get paid again just pay it off.

  25. Mike8813 says:

    @bvita: “One of the things that drags down your credit score is having a huge amount of available credit with respect to your income.”

    Actually, the exact opposite is true. The higher combined credit limit you have, the better your score. Not trying to be rude, just pointing that out.

    Your ratio of credit available vs. credit used is a large determining factor in scoring your credit that can work in your favor. A person with 10,000 dollars of combined credit with a 2,000 combined balance will have a slightly better score than someone with the same balance and only 5,000 in combined credit. (Not including the myriad other factors in credit scoring, of course. Just this one example.)

  26. suzapalooza says:

    hmmm…just rec’d a similar note from HSBC on an account in good standing that I haven’t used in over a year. Oh, and they raised the rate to 29.99%. Niiiicceee….

  27. @Shadowfire: Meh. FICO scores are just another thing for people to worry about. Total length of the record – years and years of making payments on time – is FAR more important than how long you’ve had the credit card you’re carrying in your wallet. Believe me on this.

  28. @Opie: My mortgage agent told me to close them when we bought our house. Open but inactive charge accounts are BAD. Lenders don’t like them.

  29. howie_in_az says:

    It’s ok, I’m sure that some random charge will bring it back to life and card owners will be assessed all manner of fees in the process.

  30. chrisjames says:

    @Mary Marsala with Fries: Yes, it does cost them money. It doesn’t cost anything to keep that extra number in their databases, and I’d guess that the mailers, per account, cost a small fraction of a penny. But there are operating costs that are evaluated on the number of open accounts. A certain percentage, perhaps a relatively large percentage given the way credit is slammed in our faces, is open accounts and they can reduce costs by cutting big holes in that percentage.

    Still, the worst is liability. Each open line of credit is a risk to the lender. The account holder could have a perfect credit score, with an annual income that could buy the second coming of Jesus, but it’s still a risk. That liability is exploited by the borrower (purposefully or not) and hurts the company. They make money off people using credit, but only by offsetting the people who take and run, or can’t pay back, or pay back in less than ideal terms can they turn profits. By slashing potential liability they are slashing losses. If there’s a large number of open accounts not being used, they can, without effort, drop tons of potential liability. Maybe they don’t need to, but if they can save money with small enough expense (even losing customers) they can and will.

    It’s not ideal for the card holder, but that’s what happens when you game the system, you take losses too, and don’t believe that by leaving unused lines of credit open you are not somehow gaming it.

  31. Jenng says:

    ummmmm for those of you who complain about getting all those credit offers in the mail you should and CAN opt out of all insurance and credit card offers. And guess what it will actually HELP your credit rating and save you from having to shred all that crap… [www.ftc.gov]

    And if your current cc send you those stupid blank checks you can also call them and ask that they stop… again less crap mail… less shredding. I opted out myself and my husband last year and have used my shredder much less these days.

  32. anatak says:

    Dear God, NOOOOOO! They closed a credit account that had not been used in 7 years!? Seven!

    This will seam crazy to some, but everything costs money. Cataloging and tracking every SKU at a store costs money. Issuing a PO business to business costs money. Open accounts cost CapOne money.

    I would have been shocked if it were still active! Those accounts are prime targets for abuse as the cardholder is likely not paying attention to the statements. Banks will close zero- balance checking accounts in a matter of months, not years.

    And seriously, quit fretting about your credit score, and get a life.

  33. kaptainkk says:

    @bvita: Your income does not affect your credit scores.

  34. chrisjames says:

    @kaptainkk: But lenders do ask for your income as well as checking your credit.

  35. Orv says:

    The fact is no one really knows how FICO scores are determined. It’s a closely-guarded trade secret. Everyone who claims to know is guessing.

  36. Jottle says:

    @Orv:

    And why do they guard this “trade secret?” It’s so that people can’t evaluate the supposed “rationality” behind it. Lending agencies in different countries around the world use different models to evaluate financial risk. The FICO score is protected probably so that the consumer can’t contest its logic. At least, that’s one prevailing theory. But shouldn’t a number that determines sooo many large and important purchases be intelligable and accessible to the consumer that it’s attached to?

  37. Mr. Gunn says:

    Orv: The fact is that Experian has reverse-engineered the FICO algorithm and can pretty much tell you what goes into their algorithm, or at least the relative importances of various factors such as debt-to-credit ratio and average age of accounts.

    FWIW, both my wife and I have accounts we haven’t used in years, and they recently converted mine into a rewards card. No cancellation letter yet, but I don’t think I would mind greatly, given how low the limits are on them. The only reason I haven’t canceled them to date is that they’re the oldest.

  38. Corydon says:

    Easy way to keep an emergency card from getting shut down due to inactivity:

    Go to the charity/PAC of your choice. Most of them now have an option for a monthly withdrawal. Sign up with an amount that you are comfortable with. Pay off the account in full every month.

    Bingo: your card will never get closed, you don’t pay any interest, and you get to support a worthy cause.

    For example, I’m sending a few bucks to both the Human Rights Campaign and the Electronic Frontier Foundation each month on my emergency card.

  39. chrisjames says:

    @Mr. Gunn: But, that doesn’t stop them from changing the rules … changing the FICO algorithm.

  40. TechnoDestructo says:

    It would be nice if they’d sent out notifications in advance of closing accounts. “Respond to this or else your account gets closed.”

    @Corydon:

    Is there an organization that specifically battles credit card industry shenanigans?

  41. AntoninusPius says:

    @Corydon: That’s a really good idea.

    Though I’ve had issues with Capital One’s customer service and fraud departments, I can’t really blame them for closing these inactive accounts. Think about what an ‘emergency card’ is in most cases – something you’ll never use unless your other cards are maxed out. Its really not in Capital One’s best interest to be lending people money only when they are in the most dire of circumstances.

  42. krunk4ever says:

    I had gotten this letter also. I kept a Capital One card around for travel since they don’t charge any finance fees for currency exchange. Oh well.

    @jonthomasdesigns: That is not true, I have credit cards I haven’t used in years which are still active. They still send me replacement cards when they’re about to expire.

    @Dr_Doofus: Regarding credit score, it depends on how long you’ve had the account. One factor in calculating your credit score is the average duration of your opened accounts. Initially, your score would be dropped since the average is now decreased, however it should rise back to normal after awhile.

  43. danseuse322 says:

    Thank you, Consumerist! I have a Cap One card with $3000 of credit and no balance for at least a couple years. I am going to Amazon right now to buy a book! (And pay it off immediately, of course)

  44. heavylee-again says:

    If you would like to stop receiving the prequalified credit card offers, opt out here:

    [www.optoutprescreen.com]

  45. cerbie says:

    @kingofmars: I hope not. Even if I hadn’t heard venting from Capital One customers, I would avoid them just due to all the junk mail.

    …and, now I’ve got that stuck in my head, and will be forced to listen to Dopes on the way home.
    ♪ I can see it on TV ♪

  46. I just got one of those letters, and frankly, I had no idea that I still had that account. Thanks, Capital One, for tidying up my credit report.