Your Inactive Credit Cards Could Be In Danger

If you’ve got a few credit cards lying around that you haven’t used in a while but don’t want to lose, you might want to talk them out for a walk.

Credit card companies know that cash-strapped consumers are likely to start tapping their unused credit cards, and possibly default on the payments, so they’re cutting off lines of credit for inactive accounts. Cynthia and her husband, who say they both have “excellent credit scores” and “use their credit wisely,” came back from vacation to find three Citicards canceled due to inactivity. The last time they used them was last holiday season, and the cards had $14,500 in credit available on them.

While the credit card companies are completely within their rights, cutting off lines of credit can bring down people’s credit scores because it decreases their amount of available credit, a factor in your FICO. And while closing inactive cards has always happened, the pace and scope has greatly increased in response to economic downturn. “I had read in the news that this would be a tactic credit card companies would be using, but I was surprised at how quick it actually happened,” said Cynthia.

(Photo: yksin)

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  1. zigziggityzoo says:

    I guess it’s about time to swap out emergency cards.

  2. olivia2.0 says:

    Would anyone care to enlighten us as to exactly what the credit card companies “rights” are in these cases? I.e. – how long does a card have to be inactive to be deactivated?

    • @olivia2.0: check you cardholder agreement/call the 1-800 number on the back of your card and ask a CSR. They might even be able to “opt” you out of inactivity credit cuts. Can’t hurt to ask.

    • henrygates says:

      @olivia2.0: According to your card agreement, they can change all your terms any time they like. So if they want to cancel your card, they will, and if they can’t they’ll rewrite the agreement so they can. If you don’t like the new terms, your only option is to cancel the card!

      • kaptainkk says:

        @henrygates: Yep exactly. They basically can do whatever they want and many times they don’t even have to inform you in writing. Everyone is at their mercy.

  3. arthurat says:

    I’m glad they are doing this for me. FICO be dammed.

  4. Jevia says:

    This happened to my husband recently. It was a card with a small limit, so we just decided it wouldn’t hurt us too much. We have a few others with higher limits that I try to use from time to time on small purchases to ‘keep them current.’

  5. Juliekins says:

    I have a question: If I have account(s) like this (and I do) does it look worse on my credit for them to close it than if I called them myself and closed it? If it’s better that I close it myself, I will make some time to do it. I have an ancient line of credit from Sony (used a 0% deal to get a fancypants teevee) and a Sears charge that I opened for a discount on a new stove but never used. (The card, not the stove.)

    My credit is good and I would prefer to keep it that way.

    • kamel5547 says:

      @Juliekins: It doesn’t really matter who closes it as long as it is not a negative reason (i.e. bankruptcy). Inactivity is not a negative persay, the issues arise from what the other impacts may be.

      The real pain comes from one of two factors, the loss of limits affecting your used credit to limit ratio, or the card being closed being your oldest line (by a significant amount). The length of credit history also effects the score, and if your oldest (reported) line gets closed then all of a sudden your history shrinks and your score is likely to decrease. You should have some idea of how this will impact you already though… personally I’m a fan of closing store charge accounts as they have horrible terms, low limits (generally), and limited use (as an example, in a financial crunch I doubt you’ll be using the Sony card if it is only good for things from Sony).

      • jnews says:

        @kamel5547: I’m very curious about information to support the idea that “if your oldest account is closed it shortens your credit history length and reduces your score”. I’m not picking on you since I see all sorts of people say it all the time.

        I say this only because the oldest account on my credit history is “closed” and yet the length of my credit history continues to be calculated based on this (closed) account. Therefore, I am just curious where I misunderstand people when they say that closing an account would somehow cause it to no longer count for your credit history…

        • probablykate says:

          @jnews: How do you know the length of your credit history is being calculated based on that account? Unless you got your hands on the FICO formula, you have no way of knowing that.

          If your credit score didn’t change when you closed the account or “length of credit history” is not showing up as a reason for your score not being higher, that just means there are a few other factors influencing your score more.

          Or do you mean that a banker or broker told you they were using that account to determine the length of your credit history? If so, that is a determination separate from your credit score.

          • jnews says:

            @probablykate: I suppose the simplest answer to your question is, when my credit report says “Length of Credit History” it is the time from when I opened this oldest account. The account has long been closed, because it was my student loans.

            My second item of credit was 6 years later when I got an auto loan. (Back in my day, they weren’t flinging credit cards at college students) So I’m comfortable that there is only one item that the length would have been calculated off of.

            I’m not saying that I’m right or you’re wrong, I’m just trying to penetrate the voodoo that the credit reporting companies use to cloak the fico score, under the guise of “trade secrets”. There is value in commonly held knowledge, but I’m just probing for the foundation of this knowledge. Absolutely nothing personal intended.

            • johnva says:

              @jnews: Go to myfico.com. They don’t give the exact formula, but they do give a breakdown of the basic factors they use.

              • jnews says:

                @johnva: Again, this is nothing personal, I’m just stating what I see as clear information on my credit report and asking why it is unwise for me to take it at face value.

                Myfico.com says that 15% of your score is based on “Length of Credit History” and my credit report has a line that says “Length of Credit History” which is calculated by my oldest (closed) account. I simply am trying to find out the basis for the common knowledge that closing old accounts will change this calculation.

                Thanks for your understanding.

        • johnva says:

          @jnews: It still factors into your average account age if it’s on your report, even if it’s closed. The hit to your credit score can happen when it drops off of your credit report entirely, 7 years or so down the road. So it can produce a hit to your credit score if you close your oldest account, but it’s not an IMMEDIATE hit.

      • Juliekins says:

        @kamel5547: @TracyHamandEggs!: Thanks, good to know. I think I will go ahead and close them–my utilization is quite low, and neither of these accounts should affect the age of my credit history very much. I am also not anticipating applying for any loans anytime soon, either.

    • TracyHamandEggs says:

      @Juliekins: It depends on your utilization on whether losing the card will affect your credit. If you aren’t using a big chunk of your available credit it wont have any real effect.

      The formula is complicated, but if you are left with a utilization under 40% the difference in score with be nothing or minimal.

      60% maybe its a few more points. If it takes you over 80% maybe you will feel a real hit, but still no more then 40 points if everything else is good.

    • jwalker095 says:

      @Juliekins: Use your Sears card at least every year. I work there and the recently changed some terms so that you will be charged a $30 inactivity fee every year (or 2, not sure) that you don’t use your card.

  6. davere says:

    I got a letter yesterday from Citibank telling me that they were closing the account due to inactivity. Meh. Might as well. I doubt it’ll hurt me that much in the long run.

    • S-the-K says:

      @davere: Ditto here too. I shrugged it off. I have lots of unused credit lines and have very low utilization and a FICO > 800.

      The card they are canceling is a low-rewards card I haven’t used in over a year.

  7. MillerScapula says:

    Bank of America did this to my wife and I last week. Knocked 11,000 of credit off our available credit after I had liquidated a savings account to pay down our debts so that we might qualify for a refi on our mortgage. we got the points for our credit score this summer, and now BoA’s actions will undo all that we did. I fired off an EECB this morning after Friday’s phone calls went with nary a change, nor even a review. i’m seriously tired of these antics!

    • socalrob of the 24 and a half century says:

      @MillerScapula:
      Thats BofA for you. Their credit department is random. They raised my apr to triple what I opened it as and then lied to me and told me it was always that high when I was holding a statement from them that said otherwise.

      They also have “cancelled” that card and account and sent me a new one with the same limit just different terms and account type. But I’m still using the old one just fine.

      I only have it because its my oldest credit line, but its my lowest as well and highest APR. Go fig!

  8. Erwos says:

    This is why you take a small recurring charge, and then set it to your spare credit card.

  9. Bahnburner says:

    Might be end up the best thing that ever happened to some cardholders.

  10. Sunflower1970 says:

    I keep hoping BOA would do that to one of my cards. I haven’t touched it in two years due to the high interest rate on it. And, yet, it still remains open…

    • @Sunflower1970: Uh… if you want your card closed, call and close it. At least that way it will show as ‘closed at consumer request’ rather than closed by the credit granter… somewhat better for a manual review, I suppose.

  11. cooldarkplace says:

    I’ve had an account “open” with citi since 2000 that I closed in 2001. Calling them, they can’t find the account, and yet they keep reporting it to the 3 credit bureaus each month as open no matter how many calls I make or letters I send. Maybe it will finally go away?

  12. battra92 says:

    Hmm, I do have my college one still hanging out as my “helping my credit score but useless, rewardless card” so I wonder if that will get cut.

    If it does, no big loss.

  13. hellinmyeyes says:

    You know, I think it’s a little silly to be spending 1/2 your waking financial life deciding what to do to enhance your FICO score. If you need the card, use it. If you want to keep it for an emergency, maybe use it once a month. Otherwise, just keep it open or close it. Simple: decision made. I’ll grant that a couple points on your credit score could make a bit of a deal when you’re shopping for a mortgage as far as interest, but if you truly are shopping around, you can negate any effect of that kind simply by competitive bargaining. Anything else is just adding to your stress and contemplation, and you’ll end up no better and with a bigger headache.

  14. hankrearden says:

    WTF? Aren’t these the same people/banks who suggest keeping open credit to earn/maintain improved FICO scores?

  15. hankrearden says:

    I think what I’m going to do is shred all of my cards save for one for emergencies…this is ridiculous.

    • @hankrearden: Or you could, I don’t know, keep them open? It improves your score in the long run (better account age and some extra lines of credit) and it doesn’t hurt you.

      As long as you’ve got self control when it comes to using credit, unlike so many more in America…

  16. ribex says:

    If your oldest card is inactive, this would be the one that is most important to re-energize with a small charge. Second most important would be a card with a higher credit limit.

  17. vastrightwing says:

    They are doing you a big favor. The banks that issue credit cards are evil because they force terms on you that cost you a ton of money and this is where they profit. I say good riddance and don’t let the door hit you on the way out.

    • johnva says:

      @vastrightwing: I’ve never paid anything to use a credit card.

    • baquwards says:

      @vastrightwing:

      Credit cards don’t cost me a red cent either. Actually I make a few hundred dollars profit from them yearly.

      They do not force any terms on you, you are responsible to know the terms and keep up with any changes, if the terms change and you don’t like them, close the card, you are in total control.

      Well I guess those carrying balances that they can’t pay off are putting themselves in the line of fire, but I don’t see how that is the credit card company’s fault.

  18. jimv2000 says:

    Debt to credit ratios are BS anyway. A low debt/credit ratio only says one thing about you, and it isn’t good. It says that you have a little credit card debt right now, but you could potentially have a lot more. I feel like making a big deal of this ratio is a ploy to lure people into getting higher limits their credit cards, and thus the potential for higher balances and interest earnings.

    The only ratio my mortgage lender mentioned was debt to income ratio…and that makes sense.

    • TracyHamandEggs says:

      @jimv2000: That is because your Debt to credit is already factored in to your credit card.

      As I said, its the smallest part of your score. When compared to history its minimal. One late will hit your score far more then a hit to your DtC.

    • johnva says:

      @jimv2000: No, it doesn’t say that. It just says that banks have OFFERED you access to a large credit line. It doesn’t say anything about you “potentially” having a lot more credit card debt – no one is forcing you to take it. In fact, it doesn’t even say that you have ANY credit card debt. Even if you pay your card off in full monthly, your utilization counts towards the ratio if it’s reported on your credit report.

    • baquwards says:

      @jimv2000: If I was a loan officer, I would be more impressed seeing someone with tons of available credit that they have handled responsibly for years than someone with far less credit experience. Your credit reports will show your high balances, and if they are nowhere near your limits it looks pretty good to the lender.

  19. pinkbunnyslippers says:

    How long do you not have to use your credit card for for it to be considered “inactive”? Is there a set amount of time each bank considers in rendering their ultimate decision to close accounts? Anyone know?

    • Jesse says:

      @pinkbunnyslippers:

      To answer your questions, there really is no way to tell for sure. There is no magic formula to apply that will indicate your risk of having your account cancelled by the bank. I’ve never had this happen and have cards, one even issued through Citibank which have sat dormant for years and never received a cancellation notice.

      Like the article says, the best way to prevent this is to use your unused cards a couple times a year. The purchase doesn’t have to be very big. Just go to the gas station and buy a bottle of soda, water, gum, whatever you want. Then pay the card off in full.

      The name of the game in preventing adverse action by card companies in this credit environment is to keep off their radar. You want to present a image that the card company looks at, thinks “nothing to see here” and moves on.

  20. chauncy that billups says:

    I got two citibank letters closing two cards. I consider this a good thing – I didn’t even KNOW I had these cards!! I have never used them and may have signed up for them when they had a 0% promotion 7 or 8 years ago.

  21. LatherRinseRepeat says:

    What a coincidence. I have two separate cards from Chase. I use one a lot because it has a rewards program. The other one just sits in my desk drawer. It has a really high credit limit, so I keep it open to enhance my credit score.

    I got a letter last week, saying they increased my credit limit on the rewards card to match the limit on card I’m not using. The didn’t indicate they would be closing the inactive one. I’ll have to double-check.

  22. thesadtomato says:

    I’m within a month of paying off a large credit card balance that I’ve been carrying for longer than I should. The last time I paid off a big balance like that, Chase gave me another $1000 of credit on my next billing cycle. I’m not planning to (ab)use this credit card again, but this makes me think twice about canceling the account.

  23. johnfrombrooklyn says:

    The debt/credit ratio is an ironic way to measure credit worthiness. The person that asks for $10,000 debt and responsibly keeps it at $8,000 is somehow a worse credit risk than the person that asks for $100,000 and keeps it at $30,000. Frankly, I’d rather loan money to the person that has less credit card debt overall. The argument has always been that someone with more available credit card debt must be a better risk; otherwise why would credit card companies have issued that person so much credit? But we all know that it only took a pulse to get a ton of cards.

  24. ElaineJahoodanism says:

    I received one of the letters from Citibank over the weekend as well, closing my Citibank account that had not had recent activity. My other Citibank account was transferred (bought?) by Chase several months ago. To me, its as if Citibank is getting out the credit card business. And yes, I have great credit.

  25. derfauster says:

    Citibank wrote us last week to notify us that they are cancelling our Mastercard ($12,000 credit limit)effective October 28. We have only used this card for our annual (December) AAA auto club payment of $112 for the last three years. My wife and I decided that it was a good time to call Citi and cancel our other American Express card too. I see no unusual credit needs in the near future, so it should not be an issue concerning our FICO score. Along with clearing up some of the excess credit limit clutter in our lives, we will probably close one or two other card accounts too.
    But…we will be sure to use our “emergency backup” credit cards every couple of months to try and keep them active, just in case.

  26. zeitguess says:

    I just received a letter from Citi a last week saying my inactive card will be killed at the end of the month. Out to buy a pack of gum!

    I don’t have any use for the card, but I like what that credit line does for my FICO score. Yes, Dave Ramsey, some of us DO care about our FICO scores.

  27. Jesse says:

    Just looking at that ratio, the individual with the smaller credit limit consistently needing to draw on 80% of their available credit looks more risky than a person only needing to use 30%. The fact of the matter is that more information is needed to determine how risky each account holder is.

    If the person with the $10k credit limit is making $100,000+ a year, has a high FICO score and clean credit report, sure, they are probably a low default risk. I would be fine lending more to this person. On the other hand, if this person is an 18 year old with little credit history and only making say $20,000 a year, then they are a higher risk. I may want to keep them from using the product as much to mitigate risk through higher interest rates or a lower limit.

    Debt/Available Credit is a decent ratio, but is only part of the picture. That’s why FICO scores were developed, which boils down a lot of data into a number that gives a fairly accurate depiction of how risky that person is to lend to.

  28. Jack T Ripper says:

    I got a letter from one of my ‘backup cards’ the other day saying that I hadn’t used it in 3 years and they would close it at a certian point if I didn’t start using it. I made a charge on it for a bottle of Coke on Saturday just to keep it active because it represents a fairly old account on my wife’s credit report and I don’t want them closing it. There is an impact to your credit score in a negative way when the creditor closes the account compared to when the consumer closes it. So just as a point to consider, if you don’t plan on using it, don’t just wait for the creditor to close the account for you. If you aren’t going to use it and you don’t want to keep it open, then you need to close it yourself.

  29. MsAnthropy says:

    It’s not the amount of available credit, as such, that’s a factor in your FICO scores – it’s the percentage of your total credit that you’re using – so really it’s the amount of NOT-available-credit that you have. So if you don’t carry a balance on your cards, it won’t actually make any difference to your scores if you wake up one morning to find your $20,000 credit line just became a $2,000 one. But if you’re carrying balances (and having balances report to the CRAs – most credit cards will report the balance on the statement closing date, so even if you DON’T carry a balance, and pay in full each month, your credit files could LOOK like you carry a balance), a reduced amount of overall available credit could really hurt your scores – and thus make it more likely that other lenders will worry you’re having financial problems and reduce your limits on other cards/increase your APRs, etc.

    It sucks that this is happening to people, but it’s yet another reason to avoid carrying more than a negligible balance (it actually does hurt your FICO scores not to have any utilization on any card at all – but a small balance of less than 5% reporting on a card will help your score) on your cards if at all possible. That way, at least if you suddenly find yourself with lowered credit limits, if your credit utilization is STILL minimal, you shouldn’t have to worry about your FICO scores and thus further adverse action.

  30. Tonguetied says:

    So I read one time that leaving inactive credit cards on your account reduces your score because open credit cards represent credit that you can use and thus drive up your debt.

    Now I am reading that taking the credit cards off your accounts reduces your score…

    I wish they would make up their minds.

  31. Lordstrom says:

    My oldest and highest limit card is one I’m not even the primary holder of. I haven’t used it in years because of high interest rates. My only reason for keeping it around was to have a visa. I just can’t bring myself to care if they close it.

  32. meefer says:

    BofA swears I have a credit card through them for overdraft protection but I never even applied for it. Hope that one dies.

    I spent $6 on my highest limit card the day after I got a letter from Citibank telling me they were closing it. Trying to keep it current to have more credit available.

  33. TKWarrior says:

    I’m getting ready to pay off a BOA card that has been a pain in my side in recent years. Not because of any late payments (always paid more then the min balance every month), but their games with raising the rate for no reason every 6 months. Plus their annual fee was ridiculous. I focused on paying that off ASAP because the rate was bumped close to 30% with no waver from the CSRs! So I did a balance transfer to my new card with much better terms.

    I was actually going to call in with the last payment to close out the account. But the credit limit is decent and has a history for around 4+ years. I guess my question is should I try to re-negotiate the terms of the card with BOA (I don’t want an annual fee) and keep a netflix-type monthly charge on it to keep it active, or just cut my losses?

    My new card will be mostly for emergencies when paid off and the limit is close to twice that of my old BOA card. I want to do whatever I can to boost my FICO score and will finally have paid off all my CC debt within the next 6-9 months (hopefully). Any suggestions?

  34. AMetamorphosis says:

    I rotate cards.
    Have over 11 Visa/Mastercards.
    Multiple store cards for 10-20% off on purchases.
    High credit limits, ( 5x what I make in a year ) high FICO’s as well.
    Large amount of cash advances available when the economy tanks and I need to get $$$ for food.
    ( laugh, its coming )

    Each month, 1 lucky credit grantor gets my business even though I’m a big fat deadbeat in their eyes since I pay off balances in full monthly.

    Just start rotating any cards you have and pay the darn things off for your own piece of mind.

    *** Anyone else noticing that since the economy tanked, those of us with good credit who pay their bills are getting MORE offers of credit, cash advances & zero % interest ???? I shred cash advance & o% interest transfer checks WEEKLY. ***

  35. HurfDurf says:

    Wait, the credit card companies think that people are going to start tapping their unused credit cards, so the solution is to become that person?