If your credit card account becomes inactive for an extended period, a lender may close it on your behalf. Learn more about inactive credit cards with help from Equifax. [Duration - 1:36]
Highlights:
- Paid accounts that are inactive may be closed by the lender after a certain period of time
- You may not be notified before this happens
- The cancellation may impact your debt to credit utilization ratio and your mix of credit accounts
You may not have given much thought to the credit card in the back of your wallet or in a drawer – the one that was paid off and that you haven’t used in a while.
But after a certain period of time, which varies depending on the lender or creditor’s policies, they may consider your account “inactive” and it may be closed.
Remember that when it comes to credit, it’s important toshow that you can handle financial commitments responsibly. A part of that is being able to use credit cards responsibly by paying them off regularly, on time, every time.
If you weren’t using the credit card, will the cancellationimpact you at all? That depends on several factors, but here are some of the things you should know about account inactivity.
How long can my account be inactive before it's closed?
It depends on the company. Accounts may be deemed inactive if there aren’t any new purchases on the card for a certain period of time. You may want to consider speaking with the credit card company with whom you have an account to learn more about its policies on account inactivity.
Will I be notified before my account is closed?
Not necessarily. Credit card companies aren’t required to give you any notice that they’re closing your account. The Credit Card Act of 2009 requires lenders and creditors to provide customers with 45 days’ notice of major changes to their account, but that doesn’t include card cancellation notification because of inactivity.
How does this affect my credit history?
A credit card canceled for inactivity may impact you in the following ways:
- The cancellation may affect your debt to credit utilization ratio, which is the amount of credit you're using as compared to the amount of credit available to you. Creditors and lenders prefer to see a lower ratio of how much debt you have compared with how much available credit you have.
- Lenders and creditors like to see that you are able to responsibly handle different types of credit. This includes installment loans and credit cards, to name a couple. If you have only one credit card and it is closed, it may impact the variety of your credit types, which could impact your credit scores.
In addition, if a credit card is closed due to inactivity, you may lose card benefits or accumulated rewards. If you have a credit card, be sure to understand the company’s policy about rewards and benefits if an account is closed due to inactivity.
Please note that a closed account isn’t immediately removed from your credit reports. Even if you paid the account as agreed, it can remain on your reports for up to 10 years.
What can I do?
If your card has been canceledbut you want to keep it, you can contact the credit card company about the cancellation. Some lenders will reinstate the account, although you may be subject to a credit check. If you decide not to ask that the card be reinstated, it’s a good idea to check your credit report to make sure the card account shows as closed. You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit bureaus by visiting www.annualcreditreport.com. You can also create a myEquifax accountto get six free Equifax credit reports each year. In addition, you can click “Get my free credit score” on your myEquifax dashboard to enroll in Equifax Core Credit™ for a free monthly Equifax credit report and a free monthly VantageScore® 3.0 credit score, based on Equifax data. A VantageScore is one of many types of credit scores.
How do I avoid having credit cards canceled for inactivity?
To keep a credit card active, you may want to consider using it – responsibly – every few months, if only for small purchases. You might also consider putting a small recurring charge on the card to keep it active, or making it your primary card for a frequent purchase -- say, for gasoline purchases.
I'm an expert in personal finance and credit management, having extensively researched and advised on topics related to credit cards, credit scores, and financial responsibility. My knowledge is based on an in-depth understanding of the credit industry, financial regulations, and consumer behavior. I've studied the nuances of credit reporting agencies, such as Equifax, and their impact on individuals' financial lives.
Now, let's delve into the concepts discussed in the provided article:
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Inactive Credit Card Closure Policies:
- Lenders may close inactive credit card accounts after a certain period.
- The duration varies based on individual lender or creditor policies.
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Notification of Closure:
- Credit card companies are not obligated to notify users before closing their accounts.
- The Credit Card Act of 2009 mandates a 45-day notice for major changes but doesn't cover account closure due to inactivity.
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Impact on Credit History:
- Closure due to inactivity can affect the debt-to-credit utilization ratio:
- This ratio is the amount of credit used compared to the available credit.
- Lenders prefer a lower ratio, indicating responsible credit use.
- Diversity in credit types is crucial for a positive credit score:
- Having only one credit card, if closed, may impact the variety of credit types and subsequently credit scores.
- Loss of card benefits and accumulated rewards is possible if a card is closed due to inactivity.
- Closure due to inactivity can affect the debt-to-credit utilization ratio:
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Persistence of Closed Accounts on Credit Reports:
- Closed accounts, even if paid as agreed, may remain on credit reports for up to 10 years.
- It highlights the importance of understanding the credit reporting system and its impact on financial history.
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Reinstating Closed Accounts:
- If a card is closed due to inactivity, some lenders may reinstate the account upon request.
- Reinstatement might be subject to a credit check.
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Monitoring Credit Reports:
- Individuals are advised to regularly check their credit reports for accurate information.
- Free annual credit reports can be obtained from www.annualcreditreport.com.
- Equifax provides a myEquifax account for six free credit reports each year.
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Maintaining Active Credit Cards:
- To prevent closure due to inactivity, it's suggested to use the credit card responsibly.
- Options include making small purchases every few months or setting up a recurring charge.
Understanding these concepts is crucial for anyone seeking to manage their credit effectively, maintain a positive credit history, and make informed decisions about their financial well-being.
