What Happens to Your Store Credit Card When the Store Closes?

Little might change or you could end up kissing your card and your rewards goodbye. It all depends.

As online shopping continues to grow in popularity, brick-and-mortar stores are gradually becoming a thing of the past. American retailers are projected to close around 6,000 stores in 2019. This creates a problem for cardholders who have those retailers' store credit cards in their wallets.

Here's what you need to know if this happens to you.

Your account will most likely close

You might be able to continue using your store credit card to shop online if it's only a local store location that closed. But purchases will now cost you a little more because you'll have to pay shipping costs as well. If your card works at sister store chains and one of them shuts down, you can continue to use your card and your points at the other chains.

Where it gets complicated is if all the stores associated with that account shut down. In this case, the lender will likely close the account, but they will send you a notice beforehand so you have time to plan for it.

When you or the card issuer closes a credit card, it raises your credit utilization ratio -- the ratio between the amount of credit you regularly use and the amount you have available to you -- and this adversely affects your credit score. It could also affect your average account age, lowering your score even further.

There isn't anything you can do about this, but you can take steps to minimize the damage. Don't close any other credit cards for at least six months and make sure you're using less than 30% of your remaining available credit each month. The lower you can keep your credit utilization ratio, the better (as long as it's greater than 0%). If you cannot limit yourself to 30% or less of your remaining available credit, make payments twice per month. The credit bureaus only see your final balance at the end of the month, so by paying twice, you can spend more while still keeping your credit utilization ratio low.

You still have to pay your balance

Unfortunately, the store closing doesn't absolve you from paying off any remaining balance on your credit card. The card issuer, which is typically a bank that the retailer partners with, usually holds onto the debt, but they could sell it to another bank if they choose. In either case, the card issuer will send you advance notice and will tell you where to send your payments.

You'll continue to receive billing statements until the balance is paid off, and some card issuers may help you set up a payment plan. Your existing balance will keep accruing interest. Store credit cards are known for having higher APRs than typical rewards credit cards, but you can minimize how much you pay in interest by paying more than the minimum balance each month. 

Your rewards might disappear

Store credit card rewards points will likely disappear when the store closes, but the store may give you a certain number of days to use the points before you lose them. If the store is keeping an online presence, you can continue to use your points to buy things online.

The notice your card issuer sends you should tell you what you need to know about your rewards points, but if you have any questions, you can reach out to the issuer directly for more information.

Your card issuer may offer you a new card

Your card issuer may suggest a replacement credit card with similar rewards if your store credit card closes. You're under no obligation to sign up for this card and you can sign up for a different card on your own if you prefer. Or you could just let your store credit card close without replacing it. This option makes the most sense if you weren't using the card much to begin with. 

Whenever you apply for a new credit card, the issuer will do a hard credit check on your report -- this will lower your credit score slightly. However, the effect will be negligible if you get approved for the new card, because your credit utilization ratio will decrease.

Your card issuer should keep you in the loop about what will happen to your account when your retail credit card's store closes its doors. Pay attention to these notices and start shopping around for new credit cards if you'd like to replace your now-defunct store credit card. And make sure you use up any remaining rewards points right away before you lose them.