Image Courtesy: SqueakyMarmot

If you have a credit card with a zero balance that has been laying around collecting dust for awhile, you may be receiving a letter from the credit card company soon.

Credit card issuers have been flipping the switch recently and closing unused or inactive credit cards. Unused accounts cost the company money and in a time where the bottom lines are overflowing with red ink, credit card companies are trying to cut costs wherever they can.

The credit card companies have lost so much money in the last few years, they are trying reduce risk wherever they can by closing unused accounts and reducing credit lines. According to the New York Times, credit card companies wrote off approximately
$21 billion dollars in bad credit card debt in the first half of 2008.

It may not be fair, but the credit card company has every right to close your credit card whenever they see fit. You may not have read the small print in the little booklet that came with the card but it outlines all the "rules" that come with using your credit card.

How can you minimize the risk of your account being closed?
  • Setup recurring billing. If you have a utility bill that accepts credit cards (and there's no extra for doing so), have your bill charged to your credit card and pay the bill in full each month.
  • Small Purchases. Next time to fill up your tank, use your credit card instead of your debit card or cash. When the bill comes, pay on time and in full.
  • Large Purchase. If you have a rewards credit card and have a large bill coming that you had previously planned to pay cash for, use your credit card and reap the rewards. Keep the money in a savings account until the bill comes from the credit card and pay it off in full. You'll earn a few bucks on your savings and reward points on your credit card. I do this for my auto insurance premiums. I save the money in my savings account and pay my bill with my credit card that offers 2% cash back. When the bill comes, I pull the cash from savings and pay off the credit card.
Have you recently had a credit card closed due to inactivity? Did you try to get the account reopened?

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  1. Rajeev Singh // June 22, 2009 at 9:07 AM  

    Credit card companies are indeed closing down inactive or dormant accounts in some countries. In India, majority of the card companies are not yet closing down accounts as yet, though they are scaling down the credit limits of irregular customers.But with rising NPAs, they might do that pretty soon.

  2. credit card // June 23, 2009 at 2:35 AM  

    Thanks for the tips by which we can minimize the risk of closing our account.

  3. Petunia // June 23, 2009 at 2:44 AM  

    I haven't had any accounts closed, but I have recently been declined by Discover for one of their rewards cards. The reason was that my mortgage is too new. The exact wording was "Ratio of balance to high credit for all open mortgage trades too high."

    I had no idea it even mattered, but apparently, it does now.

  4. kruel74 // June 23, 2009 at 2:49 AM  

    That is weird and actually better than in my country Malaysia where the credit card co. still make money on dormant account by charging exorbitant fees by charging annual fees and what not...

  5. grayspirit // June 23, 2009 at 2:23 PM  

    Bah ... with their outrageous interest rates, they should be making profits out of their ying yangs. But, their bad business practices and bad investments are sinking these guys ... not the credit card holder. Now they are scrambling to try to undo their bad practices and dodge the government's regulations ... these yahoos get very little sympathy from me. As for me, I am going cash and carry and just keeping one credit card with a small limit for emergency use.

  6. Fabulous Financials // June 23, 2009 at 10:21 PM  

    Yep, Citi reduced my limit from about $10k to $100 - yes, one hundred dollars. I hadn't used the card in years and had no plans to ever use it again, so I just called them up and closed it.

    Walmart also closed my store card. This was kinda irritating because it was one of my oldest revolving accounts. But I hadn't used it in over 5 years so I couldn't really complain. I don't shop there anymore, and have no plans to, so I didn't try to reopen it.

  7. Anonymous // June 25, 2009 at 5:38 PM  

    I do not have any particular plans for this weekend except the usual one. Friday/chill out with my kids-
    Saturday/church –
    Sunday/study for my finals.

  8. Anonymous // June 25, 2009 at 9:56 PM  

    I wish HSBC/Best buy had just closed my account instead of lowering my limit to $304. I havn't used it because I no longer live near one. I guess I need to close it.