ADVERTISEMENT

Best Buy takes over Circuit City cards

Use them or lose points

By Seamus McAfee

Cardholders of the Circuit City store card received news in March from Chase indicating they could use their now-defunct cards at Best Buy locations. However, experts say, the letters don't inform customers that they could damage their credit reports if their new cards remain unused.

The letters, postmarked March 20, told consumers that they would be sent a Best Buy branded card in May, but in the meantime, they could use their Circuit City card at Best Buy locations. Their new cards would have the same account numbers, rates, fees and terms as their old cards.

The once-prominent electronics store Circuit City announced Jan. 16, 2009 it was going out of business, ultimately losing the struggle to survive after cutting jobs to save money, failing to find a buyer and filing for Chapter 11 bankruptcy in November. The retailer -- which at its height operated 700 stores -- attributed its liquidation to reduced consumer spending and increased competition.  

The company terminated its card rewards program after announcing it was going out of business. Normally, when a company closes a card, the cardholder's credit score takes a hit. While Chase's action circumvents cancellation, it doesn't give cardholders the option to close their account without penalty, or clearly inform them they still have it open, whether or not they activate their new card, so even if former Circuit City cardholders take no action at all, they are placing their credit scores in jeopardy.

Card issuers increasingly are cutting credit lines to avert risk in anticipation of defaulted payments in the tightening economy. A canceled account can damage a credit report, and dormant credit cards are usually first on issuers' list of accounts to be eliminated, even if the card has a long history, a high limit or the owner has good credit.

According to a July 2007 survey by credit bureau Equifax, leaving a dormant account open can be a risk. According to the survey, 35 percent of respondents kept a spare account open, and often didn't use it. "Many consumers keep extra accounts open for an emergency," says Neil Munroe, external affairs director at the company. "However, dormant accounts, where the account is not active but has not been closed, can leave consumers vulnerable to credit refusal and ID theft," says Munroe. Many of the survey's participants said they had not gotten around to closing their dormant card accounts yet; others were surprised to find they even had accounts open and on their credit reports.

Customers who receive the new Best Buy cards would have to call and cancel the cards if they don't want them, or use them to prevent accounts from becoming dormant and risking cancellation. Lucy Duni, vice president of consumer education at TrueCredit.com, advises using a card regularly -- and conservatively. "If the card is dormant, and you want to keep it active, go ahead and use it for small purchases and pay it off," Duni said. "Just use it with restraint ... you don't want to get in too deep."

See related: How to cancel a credit card, Fed report: Banks continue to tighten lending standards

Published: April 8, 2009


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 09-30-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT