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Here is What To Do When a Credit Card Account is Closed Due to Inactivity

March 26, 2020

There are certain consumers who sign up for credit cards and never use them. Or perhaps, they hold so many cards that don’t realize they’ve not used a certain card for months or even years. Unfortunately, not using your credit card regularly can have a negative result – it may be canceled due to inactivity.

Why do issuers cancel inactive credit cards?

If you are not using your card, the issuer is unable to make money off it in any way. There are no transaction fees that the card company can collect from merchants, and there are no finance charges they can collect from you. As a result, they may choose to close your card and offer that limit to some other consumer instead – one who is likely to use their card more often than you do.

Issuers, by law, are allowed to cancel inactive cards. They may give your prior notice, or else they might just close your card without informing you. So, if your card is closed due to inactivity, you may not even realize it until the time you try to use it, and you find that the card is declined.

Does card cancellation due to inactivity hurt your credit score?

Unfortunately, yes - card cancellation for any reason can hurt your credit score. This is because the moment a card is canceled, your total available credit limit is reduced by the amount of credit limit that a certain card had. When your total available credit is lowered, but your total debt remains the same, your credit utilization ratio shoots up. This has a negative impact on your credit score.

What can you do to manage the situation?

Many issuers notify you when they are about to close your account, or right after they’ve closed your account. If they inform you beforehand, you could negotiate with them. For example, you can tell them that you’ll make an immediate purchase if they leave your account open. If the issuer has already closed the account, they may be unwilling to open it; however, you could request the issuer to transfer the limit to another card with the same company.

If the closed account cannot be reinstated, then the next best thing to do is to pay off some balances to lower your credit utilization ratio. Else you could request the issuers of your other credit cards to grant you a credit limit increase.

How can you prevent credit card cancellation due to inactivity?

It’s not known how many months of inactivity cause issuers to cancel cards; however, as long as you use it once every two or three months, it should be safe from cancellation. If you already possess a credit card, you should try and keep it open, as it will benefit you in many ways.

Many consumers use their credit cards for a multitude of reasons – from making an expensive purchase, like a flatscreen TV, to paying for a vacation. There are some who may also use cards to temporarily fund their small businesses.

That is why having a card closed due to inactivity can be an inconvenience and unfortunate. Luckily, there’s something you can do about it – just call us at Fund and Grow. Our team helps individuals with good credit obtain $50,000 - $250,000 of unsecured credit at 0% for a period of 6, 12 or 18 months. This amount can be used for anything from providing a down payment on a property to funding your small business. So, if you need financing, call us at (800) 996-0270 and we’ll do what we can to assist you.

Ari Page Ari Page is the CEO of Fund&Grow. He resides in Spring Hill, Florida with his wife and two children.

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