I logged in one day to find my account had disappeared.
Some of my credit cards get used at least once a week. Some of them haven't been used in months. No matter how often I use my cards, though, I check in on them regularly to make sure nothing untoward is going on with my finances.
Imagine my surprise when I logged into one of my lesser-used accounts to find it -- gone. Between one check-in and another, the bank had decided to close my credit card account, all without bothering to notify me of the closure.
On consideration, it wasn't a huge loss. It was a card I rarely used since I'd gotten other rewards cards that better fit my needs. Really, the only reason it was still open was because it had no annual fee. So it didn't hurt to leave it alone. But even so, I was certainly annoyed. How can they just close my account when I'd done nothing wrong -- and without warning?
Why issuers close credit card accounts
Legally, credit card issuers can close your account for basically any reason. It's their credit line. You're just borrowing it.
The most obvious reason an issuer would close your account is if they think you've become a credit risk. This could mean you missed too many payments or you've exceeded your credit limit too often. Additionally, any recent negatives on your credit reports, even with other accounts, could end up with your credit card being closed.
Even if you have pristine credit, you could still be seen as a risk. For example, if the issuer thinks you're trying to churn rewards or that you're manufacturing spend (using cash-equivalent transactions to boost rewards), your account could be closed and your rewards rescinded.
In my case, I'd never made a late payment, nor was I ever anywhere near maxing out my card. I had received a sign-up bonus from the card when I first got it, but none of my spending could be construed as manufactured or indicative of churning. In fact, I'd hardly put any spend on the card at all in the last six months -- which was actually the problem.
Credit card issuers want cardholders who, you know, use their cards. No-annual-fee cards that are sitting around gathering dust don't make the bank any money. In fact, since every account costs money for the bank to maintain, they're actually losing money on you if you're not using your card regularly.
Additionally, banks have a finite amount of credit to lend. If the credit line they gave you isn't profitable, they could close your account to open up credit to lend elsewhere.
Don't issuers have to tell you they're closing an account?
Perhaps the most perplexing part of the entire situation was that the issuer didn't even bother to send a letter to tell me they closed my account. It seems like the kind of thing that should be against the law -- but it's not.
There are a lot of consumer protection laws around credit cards. Laws dictate how much interest they can charge, who can apply for cards, and even what kind of advertising credit card issuers can do.
So far as communication goes, issuers have to notify you of changes to your interest rate or any major changes to your card terms or benefits. Oddly enough, however, closing your account for delinquency or inactivity doesn't -- legally -- fall under the realm of "major account changes."
Sure, if your account is closed because you've defaulted, you'll probably get plenty of warning signs as the issuer tries to get you to pay your balance. Calls, letters, emails, smoke signals -- the works. But if the issuer closes your account because you just stopped using it, well, don't expect a Dear John letter.
If you have a large rewards balance, you might get a courtesy note so you have time to save your rewards -- but that's entirely up to the issuer. It's best to keep any cards with large rewards balances active and in good standing. Or, better yet, use your rewards! It could very well end up as a "use it or lose it" situation.
How to protect your accounts
Since the issuers have full discretion about who they lend to -- and for how long -- there's no way to guarantee your credit cards stay yours forever. Even if you do everything right, the issuer could decide to eliminate a card product entirely and cancel the whole lot.
In general, keeping your account in good standing will help ensure the issuer doesn't close it for misuse. Pay your bill on time every month, keep your balances low, and don't abuse the rewards policies.
If you're concerned about having an account closed for inactivity, simply endeavor to use your card more often. A monthly recurring subscription, paired with automatic credit card payments, could be an easy way to keep a card active. This will also add to your positive payment history.
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