Can issuers close inactive credit card accounts without telling you?
'Stealth card closure' can happen; here's what to do about it
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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Dear Opening Credits,
I've had a department store
credit card for about 20 years, although I haven't used it for the last four
years. I called the card issuer the other day to check on the status of my
account, and I was told my account had been closed in December 2010 due to lack
of activity on my part. I did not receive a letter stating this action was
about to be taken. Can a card issuer do this? It's no great loss, since the
card had a high APR and I hadn't used it in more than 4 years. -- Stevo Reno
Hey, what do you know -- the same thing
happened to me! Yup, I was at the checkout counter of a large department store
and thought, "What the heck, I'll put it on my retail credit card
." I had opened the
account many years ago but rarely used it.
Still, it came as a shock when the saleswoman informed me that my card
was declined. She handed over the phone and I soon discovered that they'd shut
my account down due to my lackluster activity. Gee. And I don't recall getting
a "Dear Erica" letter about it either.
So, clearly, you are not alone when it
comes to stealth card closure. It happens a lot. Why? It may not be worth an
issuer's while to keep you as a cardholder if you're not actually a charging
To glean some insider insight, I
contacted Macy's (which happens to be where I had my account) about this
matter. This is what Beth Charlton, Macy's director of issue management and
special projects, had to say regarding closing accounts that have become
- Macy's doesn't technically "close" an account. But
after a certain amount of inactivity, they do review your credit again, per their
- This is not considered an adverse action and therefore
does not require a letter back to the customer.
The retailer with whom you had the
credit card may not have the identical policy, but it's probably pretty close.
You can find out with a phone call to the company's customer
service line. While you're on the line, you may also be able to reopen the
account, if that's what you want.
As you pointed out, though, Stevo,
there's no great tragedy in losing charging privileges with that card. Sure,
some retailers' accounts offer special deals, but rewards credit cards that you
can use anywhere are usually the better option because they are flexible and
the benefits are stronger. Their interest rates also tend to be lower than
their single-store cousins.
The only problem I can see with the
issuer closing the account is what it can do to a credit rating. Having a card
for a long time is favorable, so keeping older accounts alive is a good thing.
Length of credit history comprises 15 percent of a FICO score -- not a huge
factor, but not inconsequential either. Having a portion of your overall available credit shut down can also ding your credit, since that can knock your debt-to-credit-limit ratio -- another factor in credit scoring -- out of whack. But it doesn't
sound like you had a balance, so this is an issue only if you had balances elsewhere. That it was shut
by the creditor can be construed negatively by someone looking at the report,
but that's usually a minor point.
Ultimately, I urge you look at the
whole picture. If the rest of your credit report indicates that you're a
responsible borrower, fabulous. Don't sweat the small stuff. Who cares if that
store deemed you unfit for their card? Clearly there are plenty of other
plastic fish in the sea.
See related: CreditCards.com's 2010 retail credit card survey
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: March 23, 2011