Why You Should Prevent Credit Card Companies from Closing Your Credit Card Account

People who choose to use their credit cards only in emergency cases may be doing more harm than good. It’s because a credit card account can be closed because of inactivity. The issuer of your credit card has all the legal rights to close your credit account when it thinks that is the best move for the company.

When you go several months, or years, without charging anything on your card, then you shouldn’t be surprised if your credit card issuer cancels your account.

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Why Creditors Close Inactive Credit Cards

img-4By now, you are probably asking what the effects are to your credit if you have an inactive credit card. Before we dive into that, I will explain why credit card issuers prefer to close an inactive credit account.

The logic is very simple.

The creditor would prefer to have someone who will use the credit card from time to time and pay interest rather than someone who will not.

It’s simply a money-based decision.

Some credit card issuers inform their credit card holders in advance that their cards will be closed due to inactivity. While other issuers close your account first and send you a letter informing you that it has already been closed. Unfortunately, a closed credit card can hurt your credit score in some cases.

How Your Credit Score is Affected by Closed Account

When a creditor decides to close a credit account, the most affected part of the credit score is img-5credit utilization. Credit utilization accounts for about 30% of your credit score in total.

When your account gets closed, the credit limit is not considered part of your utilization anymore.  So it looks like you are using a lot more of your available credit.  This will LOWER your credit score.

You can reduce the effects of a closed inactive credit card by requesting credit limit increases from your other credit card issuers or by paying off some of your outstanding credit card debt.

Just keep in mind, the lower your credit utilization, the higher your credit score will be.

When asking for a credit limit increase, the credit card issuer will consider your:

  • current income
  • time since the last increase
  • credit history
  • as well as other varying factors to assess whether you qualify for a credit limit increase or not

In the case of a joint credit card, credit history and other factors of both cardholders will be considered.

Prevention is Key

If you believe it’s a concern, there is an obvious way to avoid all of this. What you need to do is charge a few things to your account from time to time. It doesn’t mean you have to use your credit card to buy things you don’t normally buy or need.  Nor is this a call for you to get yourself into debt in order to keep your credit score high.

Just use the account to buy a few things a year. Something you can pay off in 1 or 2 billing cycles.

If you do this, the credit card company is happy because you are using the credit card and they made a month or 2 of interest from it. Best of all, you are able to protect your credit score because the creditor isn’t likely to close your credit card if you use it regularly, even on small purchases.

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Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

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NHBS Inc © 2022

NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

Privacy Policy Terms of Use

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