Will my issuer close my card accounts when I retire?

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question Dear To Her Credit,
I have two credit cards. I use both monthly and pay the balances in full when due.

I am thinking about retiring and when I do, my income will be reduced. Can a card issuer close a credit card account if the account holder's income drops, even if the account has been in good standing since inception?  – Millie

Answer

Dear Millie,
Your credit card company is not going to close your account when you retire. They won’t even know that you aren’t going to work every day, or that you no longer get a paycheck.

With all the things your credit card company knows about you – from how much you owe on your mortgage to how long you’ve had a Nordstrom account – it’s still surprising the things they can’t tell by looking at your credit report. Perhaps two of the most relevant, interesting things not on your report are your income and your assets, such as how much money you have in the bank or how much real estate you own.

It’s a good thing creditors aren’t kept appraised of all the ups and downs of our careers and our net worth balances over the years. As it stands, once you’ve applied for credit and been accepted, it’s up to you to keep up the payments. If you lose your job the day after you get a card or loan, but you keep up your payments by using savings or selling a car, for example, the fact that you are actually jobless doesn’t mean you lose access to your credit.

Issuers can close your card for any reason, any time

On the other hand, although credit card companies don’t know when your income changes or many other things about your life, remember that they can close your account any time for any reason. No laws prevent them from doing so.

When cardholders fall far enough behind on credit card payments, they may have their accounts closed. However, being delinquent is not the only reason banks close card accounts.

Banks prefer to keep accounts that are profitable to them, and they often use a points system to decide which ones are. An account that is not used enough is likely to meet this criterion. It costs money for the bank to keep an account open and maintain records, so unused accounts may get the axe.

Keep your credit cards open and active

So, you don’t need to worry about the bank closing your cards just because you retire. However, it’s a good idea to keep two credit cards open and active. If one card is closed, or even if it’s just temporarily frozen because of suspicious activity or some other reason, you’ll still have the other.

Know that if you choose to apply for a new card, the Equal Credit Opportunity Act prevents lenders from age discriminating, unless, “it’s used to determine the meaning of other factors important to creditworthiness,” according to the Federal Trade Commission. For example, a card issuer could determine that because of your age, you may be approaching retirement and your income will fall off.

You’re doing well to keep your balances paid off every month. So many people close to retirement, or already retired, have credit card balances they can’t figure out how to pay off. Their hopes for a pleasant retirement can be ruined by just a couple of maxed out cards.

As you get closer to retirement, be sure to make a new budget so you know what it will take to stay out of debt on your retirement income so you are one of the “lucky” ones who can enjoy the lower stress, comfortable retirement you worked so hard to achieve.

See related: Pay down debt, if you can, before retirement, 4 options to tackle credit card debt in retirement

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Updated: 12-15-2017