As the grip of the financial crisis tightens, credit-card delinquencies are on the rise. To protect themselves against risky credit holders, companies are focusing their efforts on closing inactive accounts. That can be bad news for cardholders. Along with the noticed decrease in direct mail credit card solicitations, credit card holders who haven’t used their plastic for a period of time may notice an increase in account termination letters.
For years consumers have been advised not to cancel inactive credit cards for the fear that the move would inadvertently have a negative affect on their credit score. Kiplinger.com reports that, “There are two key reasons why closing old credit-card accounts can hurt your credit score: The move affects your credit utilization ratio and your credit history.”
Credit lines may be closed for inactivity if the account holder is considered unprofitable. As with any business, there are associated costs with issuing credit cards and credit issuers have their eye on the bottom line. Additionally bank regulators have just suggested new rules for more restrictions on the credit card industry at large. The possible revisions of cardholders being granted more time before an account is tagged past due and limiting the raises in interest rates could cost the issuers a pretty penny.
If consumers are concerned about having their credit card account closed, the old adage of “use it or lose it” holds their best defense. Take that dust- or ice-covered “emergency card” from the secret hiding place and monthly make a small purchase (i.e. a movie ticket, a gallon of milk, etc.).The key is to make sure to PAY OFF THE BALANCE IN FULL BY THE DUE DATE.Not only will this help ensure the current account is active, but by showing financial responsibility of this nature, your credit score could begin to inch upwards.