Can a credit card company close your account without notice

When you go years, or even months, without charging anything on a credit card, don't be surprised if the issuer cancels your account. A credit card issuer has the legal right to close your account as it deems necessary, and inactivity is one of the most common reasons for closure.

Table of Contents Show

Why Creditors Close Inactive Accounts
What Inactivity Cancellations Do to Your Credit Score
What Can You Do About It
How to Prevent Inactive Credit Card Closings
Can a credit card company randomly close your account?
What happens when a credit card company closes your account?
Why do credit card companies cancel your account?
Does it hurt your credit if a credit card company closes your account?

Your credit card issuer might let you know in advance that the account will be closed, but they're not required to give you notice. Some companies close your account first, then send you a letter telling you that it has been closed. Some cardholders don't even realize their card has been closed until they try to use it and the card is declined.

Why Creditors Close Inactive Accounts

It all comes down to a business decision. Companies have a limit to the amount of credit they can extend, and they'd rather have the lines of credit go to people who are going to make charges and incur interest. After all, that's a big part of how credit card companies make money. Closing your unused credit card gives the card issuer the ability to extend that line of credit to another borrower who will use the account—and help boost their bottom line.

What Inactivity Cancellations Do to Your Credit Score

If your account is closed, it could increase your overall credit utilization—depending on the balance on all of your credit cards—which can hurt your overall credit score.

Your credit utilization is the amount of available credit you're using, and it counts for 30% of your credit score. When a credit card is closed, that credit limit is no longer considered in your credit utilization. So, if you have balances on all your other credit cards, your utilization increases.

For example, if you had a total of $3,000 in credit card debt and a $5,000 total credit limit, your credit utilization would be 60%. If a credit card with a $1,000 limit was closed, your credit utilization would rise to 75%. A credit utilization that's lower than 10% is ideal. Anything above 30% is too much.

Though it has been widely reported that a closed credit card hurts your credit by shortening your credit age, it's not entirely true—not yet, at least. As long as the account appears on your credit report, it's still factored into your credit score. It's not until the account drops off your credit report (in about ten years) that your credit age could be affected, particularly if it's your oldest credit card.

What Can You Do About It

If you find out your credit card is being canceled because of inactivity, and it's a card you want to keep open, call your credit card issuer and request to keep it open. Offer to make a purchase on that account immediately in exchange for having it reopened.

You may not be able to convince the issuer to reopen a closed credit card. However, you may be able to have the credit limit moved to another credit card with that same issuer, which should help your credit utilization.

You can also decrease the effect of a closed credit card by paying off some of your credit card debt or by requesting credit limit increases from your other credit card issuers. The card issuer will consider your credit history, time since the last increase, current income, and other factors to decide whether to increase your credit limit. If you have a joint credit card, both cardholders' credit histories and other factors will be considered.

How to Prevent Inactive Credit Card Closings

There's no standard inactivity time limit, so it's difficult to predict when a credit card issuer will close your credit card. It could be six months, one year, two years, or more.

You can prevent inactivity cancellations by using your credit card periodically. One easy way to do this is to put one or all of your recurring bills—charges you expect to pay every month—on the credit card, such as your phone or utility bills. Or, make a small charge on your credit card every two to three months and pay the balance in full when you receive the statement. That way, you keep your credit card open and active, and your balance paid off.

Your credit card company just informed you it’s closed your account. Worse, perhaps you discovered the closure after your card was declined. This is highly inconvenient, but don’t panic: You may be able to get your account reinstated.

If your account was closed without explanation, take these two steps:

Call your credit card company.This is the first thing you should do after learning about your account closure. Call your provider’s customer service line, and a representative may be able to shed light on your account status.
Ask if you can have your account reinstated, and commit to fixing any issues.
It never hurts to ask. If the reason for your account closure is relatively tame — inactivity, for example — your account may be reopened with a simple request.If the reason is more serious — such as default — the odds of your account being reopened are much lower. Still, you may have a chance if you negotiate with your card provider and commit to fixing the issues that caused your account shutdown.

Beyond making an appeal to your card company, there’s not much else you can do to get your card account reopened. But if your account is permanently closed, this could be an opportunity to get another credit card you like even more.

Here are a few reasons your card company may have closed your account. If the company doesn’t let you reopen your account, consider a card from a different provider.

You defaulted on your payments.
If you don’t pay your card bill for 60 to 90 days, your card provider may close your account.It gets worse if you don’t pay your card bill for several months. Typically at the six-month mark, your provider will charge off your debt. This essentially means your provider designates your card debt as unlikely to be repaid. It will report the charge-off to the credit bureaus, and your credit score will take a hit. This unfavorable mark will stay on your credit report for seven and a half years.
Your card is inactive.
Credit card issuers make money when cardholders carry balances month to month. If you’ve stopped using your card for a significant period of time, your provider might see you as someone it can’t profit from anymore. Accordingly, it may close your account.
There’s been a change in your credit report.
In this regard, one of the most common reasons for account closures is a significant drop in your credit score. This may stem from a string of late payments on your credit accounts.Consider requesting a copy of your credit report to see if there are any red flags. Also, ask your card provider for information about your account to clue you in on what you need to fix.
You didn’t agree to changes to your card terms.
With at least a 45-day notice, your card issuer can increase your interest rates or make another significant change to your account. If you don’t agree to a change, your provider might close your account. You’ll be allowed to pay off your balance according to your current card terms.
Your provider is going through changes.
You may actually have done nothing wrong — your provider may simply be making a major change. For example, it might be discontinuing support for the card and closing the product to new applications. Or it might be going out of business.In these scenarios, the credit card company will notify you about the change, and it may give you recommendations on how to move forward.

Your card company has the right to close your account for any reason. If the company won’t budge on its decision, it’s easier to simply consider another card provider.

Here are a few things to do after your card account is closed:

Re-calculate your credit utilization rate.
If your credit card is closed, your total credit will go down. This, in turn, will increase your credit utilization rate — which typically has a negative effect on your credit score.Re-calculate your credit utilization rate and check if it’s under the recommended level of 30%. If it’s not, consider paying off some debt, whether it’s from the closed card or other credit cards. This will help you protect your credit score, which will factor heavily when you apply for a new card.
Take stock of your financial situation.
If you had debt on your closed card, you’re still responsible for it. Pay it off as soon as you can.Consider checking your credit score and credit report. Also, consider whether you need — or even want — another credit card.
Apply for a new credit card.
It’s time to look for a new credit card if you’ve determined your finances support having one. Think about what you didn’t like about your old card, if there were any downsides. Or if you really enjoyed your old card, look for a similar product.

Compare credit cards

How to avoid your account closing in the future

Keep up with payments.
Making payments on time is a tried-and-true way to stay on good terms with your card provider.
Use your card.
To prevent card closures in the future due to inactivity, use your card at least once every three months. You don’t have to carry a balance — just have some spending activity once in a while.
Protect your credit score.
Significant drops in credit scores are sometimes the reason for account closures. To avoid giving your provider cause for concern, understand how your credit score is determined — then maintain it.

Getting your card account closed is an unpleasant surprise and a big hassle. Your best bet is to call your provider, inquire about the closure and see if you can get your account reinstated. If your card is closed for good, consider applying for a new credit card.

Kevin Joey Chen was a credit cards, banking and investments writer for Finder. His work and analysis have appeared on CNN, U.S. News & World Report, Business.com, Lifehacker and CreditCards.com.

More guides on Finder

Can a credit card company randomly close your account?

Credit card issuers may close accounts suddenly and without notice. This can be done for several reasons—maybe you haven't used the card in a long time, or you've breached the terms of the card agreement, for example.

What happens when a credit card company closes your account?

When an account is closed, the amount of available credit decreases, which impacts your credit-utilization ratio—the amount you owe as a percentage of your total available credit. This ratio accounts for 30% of your credit score. It's best to keep your balances around 30% or less of your available credit.

Why do credit card companies cancel your account?

If you stop paying entirely, the card issuer will understandably not want to advance you any more credit. And if you haven't made a payment for 180 days (about 6 months), the company is likely to close your account.

Does it hurt your credit if a credit card company closes your account?

Closed accounts and your credit reports Closing a credit card can hurt your credit score because it affects your utilization ratio, which is the second most important factor determining your score after your payment history.