What To Do When Credit Cards Are Closed Due To Inactivity?

Have you got letters from credit card companies recently informing the decision to close your credit cards due to inactivity?

I got two such letters in the past couple of months, one from Chase and one from Citibank. The contents of the letters are almost identical, something like: After a review, we noticed that you haven’t used your card for at least 24 months, which means the card can no longer meet your financial needs. Therefore we have closed the account.

And the letters all came after my accounts have been closed. They are not warnings. They, the credit card companies, simply informed me what they have done already. While it’s true that if I haven’t used a card for 2 years, I must have abandoned it for various reasons, most likely being that the card no longer attracts me any more, however, I don’t want those just being closed. Why? Because closing a credit card, especially an old card with high credit limit, could affect my credit history and damage my credit score. According to myFICO, FICO credit score are determined by the following factors:

1. Your payment history – approximately 35%
2. How much you owe – approximately 30%
3. Length of credit history – approximately 15%
4. New credit – approximately 10%
5. Other factor- approximately 10%

As you can see, the amount of debt and the length of credit history together count for nearly half the credit score. Therefore, closing an old account with high credit limit will 1) Increase relatively the amount you owe as the total credit limit is lowered; 2) Shorten your credit history. To avoid these negative impacts, here’s what I did after receiving the letters.

I called the issuers, Chase and Citi, asked to move credit limits from those cards that have been closed to those that are still active. Those accounts were closed already, but they were able to move the credit lines for me. In this way, even though the accounts were closed, my debt-to-credit ratio wasn’t affected as I got to keep my overall credit limit. And since those cards are relatively new, closing them won’t have a big impact on my credit history either.

However, if the account is old, then closing it won’t be a good strategy. While I was on the phone with Chase bank, I was told that my Chase Sony Card is all above to be closed due to inactivity, but that account was opened 2000. I don’t want to close an account that’s more than 8 years old. So I need to charge a small amount on the card immediately to keep it alive.

If you get a letter from a credit card issuer as those I got, don’t panic. There are options available to limit the damage even if the card is already closed.

*Photo source: edwardkhoo.com

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