Buzz
If you’ve had credit card debt before, or you own an older card that’s no longer in use, you’ve likely encountered the suggestion that you shouldn’t cancel it, but rather leave it open to help improve your credit score (see more on how that works here). It’s a reasonable idea in theory. However, if you’re not actively using your card, the issuer might cancel it for you.
There are numerous reasons why your credit card issuer (the company, bank, or institution that issued your card) might decide to cancel your account. In fact, they don’t even necessarily need a justification to refuse extending your credit line.
But certain reasons are more prevalent than others. One of the most common is not using your card often enough. The issuer profits each time you make a purchase, and naturally, they want you to accumulate debt and pay interest. If you’re not using your card, you’re not a valuable customer to them.
If you’re focused on paying down debt or consolidating cards and want to avoid using your older cards, consider setting up auto-pay for a bill or two to ensure there are still transactions happening each month.
Your card issuer may also cancel your account if your credit score drops or if you accumulate a substantial amount of debt. “We assess various factors, including spending and payment history with American Express, as well as debt/spending/payment history with other lenders, credit bureau scores, and other credit report details,” said Sonya O. Conway, vice president of public affairs and communications at American Express, in a statement to CreditCards.com.
Additionally, if you fail to adhere to the terms of your card agreement—such as missing payments or exceeding your limit—they can terminate your account. And of course, closing cards negatively impacts your credit score.
Your card issuer is not required to inform you before canceling your account. “Under the Equal Credit Opportunity Act, creditors are allowed to close an account for delinquency, inactivity, or default without prior notice,” according to CreditCards.com. “If the closure is due to other reasons, like a poor credit report, they must notify the cardholder within 30 days of the decision.” However, this is not exactly beneficial to the consumer.
Besides making regular purchases to keep your account active, here are a few additional suggestions from CreditCards.com:
Ensure you make at least the minimum payment every month by the due date.
Monitor your credit score regularly to spot any discrepancies.
Look into online discussions about cards you're interested in to check if other users report frequent cancellations.
In addition, credit card issuers have the ability to adjust your interest rate or credit limit based on various factors. However, if you consistently make on-time payments and avoid accumulating debt, you’re likely to stay in good standing.
