Can a Credit Card Be Closed Due to Inactivity?

A credit card can be closed due to inactivity. This occurs when an account has no transactions or a zero balance for an extended period. The exact duration varies by issuer, generally spanning several months to a couple of years. Understanding the implications of such a closure is important for financial health.

Issuer Policies on Inactivity

Credit card issuers close accounts due to inactivity for reasons related to operational efficiency and risk management. Maintaining inactive accounts incurs administrative costs, as issuers must manage credit lines and provide customer service without generating revenue. Inactivity fees were banned by the Credit Card Act of 2009, so issuers cannot directly charge consumers for dormant accounts. This incentivizes closing unprofitable accounts.

Issuers also consider the risk associated with unused credit lines. A dormant account could be exploited for fraudulent activity, or a consumer might incur large debt if facing financial hardship, increasing default risk. To mitigate this, companies often close accounts with no activity for 6 to 24 months, though some wait up to three years. Policies vary, and some companies may not notify cardholders before closing an account due to inactivity.

Credit Score Impact of Closure

The closure of a credit card account can affect an individual’s credit score. A key factor is the credit utilization ratio, which measures credit used against total available credit. When an account closes, its available credit is removed, increasing this ratio. For example, if a consumer has $10,000 in total available credit and uses $2,000 (20% utilization), closing a card with a $3,000 limit drops total available credit to $7,000. The same $2,000 balance then becomes 29% utilization, potentially lowering the score. Maintaining a credit utilization ratio below 30% is recommended for a healthy credit score.

Another factor influenced by account closure is the average age of accounts. A longer credit history can positively impact a credit score. While a closed account typically remains on a credit report for up to 10 years, its closure can eventually reduce the average age of a consumer’s active accounts, particularly if it was an older card. This effect is not immediate because closed accounts in good standing continue to be factored into credit score calculations for many years. However, over time, as other accounts age and the closed account eventually drops off the report, the average age could decrease, which might negatively influence the credit score.

Maintaining Account Activity

Preventing a credit card account from being closed due to inactivity involves demonstrating consistent usage. One straightforward method is to make small, occasional purchases on the card. This could be as simple as buying a coffee or a low-cost item every few months to register activity on the account. Ensuring these small purchases are paid off promptly avoids interest charges and helps maintain a positive payment history.

Another effective strategy is to set up a minimal recurring charge on the card, such as a streaming service or a small utility bill. By automating a payment to the card, and then setting up an automatic payment from a bank account to cover that charge, the card remains active without constant manual oversight. This approach ensures the account regularly reports activity to the issuer and credit bureaus, contributing to a favorable credit profile. Some issuers may send a notice after several months of inactivity, offering a chance to use the card before closure.

Addressing a Closed Account

If a credit card account has been closed, the primary step is to contact the issuer directly. This call can confirm the reason for closure and inquire about reopening the account. While not guaranteed, especially if closed for an extended period, some issuers may consider reinstating accounts closed for inactivity, particularly if the request is made within 30 to 60 days of closure. Be prepared to provide account details and discuss your financial standing.

Reopening an account is more likely if the closure was due to inactivity rather than issues like missed payments or default. If the issuer agrees to reopen the account, be aware that the terms might change, including interest rates or credit limits. In cases where reopening is not possible, it is important to understand that the closed account will still appear on credit reports for up to 10 years, continuing to influence credit history. Consumers should regularly review their credit reports to ensure the closure is accurately reflected and that no unexpected negative information has appeared.