Card account keeps getting hacked. Close it?
Canceling a card can impact credit score, but it may be necessary
Dear Credit Smart,
I understand that an older credit card is a good thing, but I am considering canceling one I have had for a long time because it keeps getting hacked, and new cards (and numbers) issued, which is a hassle (has happened four or five times). What would you advise? – Nancy
It is true that being in possession of an older card generally helps a person’s credit score by showing consistent credit history. It is also true that closing an account can have a negative effect on a score, because closing an account reduces available credit. So conventional thinking says to never close an account. But there are exceptions to every rule, and it could be that this is might be one.
Identity theft is an ever-present danger; it seems that there are constantly stories in the news about the latest hacking done by these thieves. While it sounds like your creditor has done a good job of quickly identifying these problems by issuing new cards with new numbers, I can understand your frustration.
Before you do anything, I would suggest that you reach out to your creditor and see what they are doing on their end to prevent these hacking instances. I am quite sure that the frustration you are feeling is also felt by your creditor. Changing credit card numbers and issuing new cards to hundreds of customers is an even bigger hassle for them.
When you call you should tell the creditor that you are considering closing the account due to the number of times your card has had to be reissued. This will probably get you transferred to a supervisor, which is a good thing because hopefully they will be able to give you some real answers about the steps that are being taken to prevent their account information being stolen by cyberthieves.
You should also assess, as best you can, the impact that canceling a card would have on your credit. While the exact impact is not possible to see, because credit score formulas are proprietary, you can get a good idea.
The impact will depend on these factors:
- The size of the credit limit. The amount of available credit on the card contributes to your overall credit line. Having a large amount of unused, available credit helps your score. If you regularly carry a balance, on this card or other cards, canceling it could have a large negative impact. If you never carry a balance, it’s less of a concern. For more information, see “Credit utilization: How this key scoring factor works.”
- The age of the account. Canceling a card will also impact the length of credit history portion of your credit calculation. Scoring formulas evaluate the ages of your oldest and newest accounts, along with the average age of all your accounts. This may have less of an impact than you think, though, because even on closed accounts, your positive payment record stays in your credit report for 10 years. For more, see “Length of credit history: What it means to your score.”
After speaking with your creditor and evaluating the credit impact, you will have a decision to make.
If you do keep the account open: I suggest you use it sparingly and pay more than the minimum monthly payment on purchases in order to avoid maximum interest. Because you have had problems with the card before, stay on alert by closely monitoring your card statements and pulling your credit reports regularly. If you use the card for recurring charges, move those charges to a different card or payment source immediately.
If you decide to close the account: Be prepared to see at least a small dip in your credit score since your available credit will be reduced. Assuming you have other accounts in good standing with available credit, the impact will be very modest and your score will recover quickly. Also, don’t be in a rush. Hold off on closing it if you plan to take out a mortgage or auto loan in the near future. You don’t want have your credit in flux when a lender is evaluating it. You could also open another credit card account first, before closing down the other one. That way, you would have already replaced the credit limit you are about to close, and you would minimize the impact.
Remember to always use your credit smarts!
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Use 0-percent promotions to create an emergency savings account – Don't rush to pay off card debt that won't incur interest for a while; make calculated monthly payments and use your cash to give your financial health a boost instead ...
- How far can I go over my credit limit before my card gets declined? – There's no magic formula to guess when a transaction on a maxed-out card will go through, but if it does, it may impact credit limit, monthly minimum payments and/or even credit score ...
- Is paying off card debt with a personal loan a good idea? – The option of taking out a personal loan to pay off credit debt can work for some consumers, but much will depend on credit score, amount of debt, and spending habits ...