Can a Bank Close a Credit Card Account Due to Inactivity?
Not only can credit card issuers close your account due to inactivity, they often do. Many Americans are changing their behavior after the financial crisis of 2008 and are curbing spending, according to SmartMoney. Often, the thanks these consumers get by not using their credit card is having the card closed without warning.
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Effects
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Most major credit card issuers slash credit lines or close accounts if you don't use your card on a regular basis. Credit card issuers review accounts before making the decision to close them. Typically, if you don't use your card for a year, you are at risk for having your account terminated.
Reason
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To explain the reason why a credit card issuer might close your account, Chase spokeswoman Stephanie Jacobson said on the SmartMoney website that inactive cards with an open credit line present a risk for fraudulent activity. Additionally, inactive accounts cost the credit issuer money without receiving any benefits in the form of interest or merchant fees.
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Function
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Your credit card issuer must notify you in writing when it closes your account. The company does not have to give you any advance notice. If you do get advance notice, the only remedy you have is to start using your card again.
Significance
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The credit card issuers may benefit from closing inactive accounts, but you won't. Not only will you have less credit in case of an emergency, your credit score will go down. One way the Fair Isaac Corporation determines your FICO score is by how much credit you are using compared to how much credit you have available to use. When your credit card account closes, you have less available credit. Also, lenders that see an account closing on your credit report may view that as negative.
Expert Insight
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Keep track of all the credit cards you have and use them occasionally to keep them open, advices John Ulzheimer of Credit.com on SmartMoney. If a card issuer does close your account, you can contact the company and ask for reconsideration. Tell them that you intend to use the card again if you can have your account re-opened.
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