Do Credit Cards Get Cancelled If Not Used?

Do Credit Cards Get Cancelled If Not Used?

March 27, 2020         Written By Tracy Farnsworth

How often do credit card accounts get canceled? If you are not using a card, does not it make sense for the company to close your account and cancel your card? The answer is not as clear cut as you may think. In many situations, it is not in the credit card company’s advantage to cancel the card and close your account.

Should I Cancel My Unused Card?

Is it better for you to cancel a card if you are not using it? It is strongly encouraged that you do not get rid of credit cards you have paid off. Closing the card will affect your credit utilization percentage, which affects your credit score. While credit utilization is not the largest factor in your credit score, it is part of it. You have to carefully decide if it is better to leave the card open.

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Say you have three credit cards with credit limits of $5,000 each, that’s $15,000 total in credit limits. All three of the cards have balances. You owe $1,000 each on two of the cards and $4,000 on the other. While it is not an ideal credit utilization percentage, it is currently at 40%. You pay off $1,000 and close one card. You now have a total credit limit of $10,000 and owe $5,000. You have raised your credit utilization to 50%, so your credit score could go down. Keeping that card open is better. With the $15,000 credit limit and an unpaid balance of $5,000, you would have had the ideal credit utilization of 30%.

The key is not using that card you have paid off. If you do not use it, can the credit card company cancel your card? It is possible, but it depends on the situation. Here are some of the scenarios and ways to keep your credit card account from being canceled.

The Two Ways Your Card Can Be “Unused”

Unused, but Responsible

What puts a card into the category of “unused?” You can pay off your account in full and not use your card. That is an unused card, but it is unlikely a credit card company will cancel your account. You have shown you are responsible and pay your debts as promised. That is appealing to any financial company.

You could have a balance and be paying it off. You are making payments, but you are not adding additional charges. That is also an unused card. Again, you are paying off what you owe, so it is unlikely they would cancel your card.

Unused and Irresponsible

Now, if you have a balance and stop making payments, you are going to be in default after a few months. You may not be making new charges, the card is unused. But, the company has to consider that if the card remains open, there is the chance you could keep charging more while you are not paying off what you owe. The credit card company could lose thousands of dollars. In this case, the card company is going to cancel your card.

They will also have to sell your unpaid balance to a debt collector who will take every step possible to collect the money you owe. You will face constant phone calls, your neighbors may get phone calls trying to narrow down if you still live at that address, and multiple letters. It is stressful and best to avoid getting to this point by talking to your credit card company the minute you cannot make a payment.

Other Situations That May Trigger a Card Cancellation

Sudden Financial Hardships

If your credit score suddenly drops by a large margin, it can be a sign that you are having financial problems. You have taken on too much debt and ruined your credit utilization percentage. You may have started defaulting on other loans. No matter what is causing the lower score, it can be worrisome to the credit card company. They may cancel your card to prevent you from being able to make a rush of charges before defaulting.

Card Issuer Eliminating Specific Card Product

The credit card company is getting rid of a certain card product. If that happens, you will get a notification that offers a replacement card. For example, you may hold a credit card with a specific rewards program, but that rewards program is being discontinued. You will be given an option to transfer your account to a different card. If you do not like the replacement, your card is canceled instead.

Issuing Bank Closing

It could be that the bank is closing. Again, your account would be transferred to another bank or credit card company that buys up the closing business. If you do not like the change, the credit card company would close your account and cancel your card instead. An example of this would be a store credit card. If the store files bankruptcy, the credit card they had is no longer valid. Whoever purchased their credit card accounts would issue new cards to all cardholders. If you do not agree to the new terms, you will have the account and card canceled. If you still have a balance, that must be paid off following the terms you had with the store.

Changing Credit Card Terms

There is another situation where a card company may cancel your card. You have been sent a notice that the credit card company is changing terms and you do not agree with them. You do not want to see your APR increase. If you refuse to agree to the change in terms, the credit card company can cancel your card. Any balance you owe is paid off over time, but the account is marked closed and prohibits you from adding new charges.

Credit Cards That You Have to Use to Keep Them Active

Some credit cards require you to use them within a set period or to use them frequently. Prepaid credit cards and gift cards are examples of cards that may require regular use. If you do not use them, you could lose money to maintenance fees.

If you have a credit card attached to a rewards program, read the fine print. Some rewards programs require active purchases to keep you enrolled. If you fail to meet the requirements, you could be removed from the rewards program and lose the rewards you have gained to that point. When you apply for a new credit card, read the rewards terms and conditions carefully and make sure you meet your obligations to avoid disappointment.

What About Credit Card Expiration Dates?

Credit cards do have expiration dates, but these dates do not mean the account will close on that date. Expiration dates are simply a date assigned by the credit card company to signify that it is time for a new replacement card. It gives the credit card company a chance to issue a new credit card number, which can help prevent theft if your credit card number is being sold on the dark web after a website breach. It gives credit card companies a chance to redesign their cards’ looks or add new technology to add a new layer of security. It also helps make sure cards are replaced periodically so that they do not wear out or break after months or years in a wallet.

When your card is about to expire, you will get an email or see a notice in your online account that a new card is being mailed. Carefully watch your mail at this time. If the card does not arrive on time, let your credit card company know. Mail can get damaged in transit. There are also cases where thieves take mail from mailboxes while people are at work or not collecting their mail quickly enough. When it does arrive, make sure you activate it, sign the back, and cut up your expired credit card.

Is It Better to Cancel Unused Credit Cards?

As previously mentioned, your credit utilization percentage may take a hit if you cancel your card. Carefully weigh that before you cancel an unused credit card. You may find it advantageous to leave that card open and untouched and negotiate lower APRs or no annual fees on your other cards. If your card company will not agree to lower your interest rate or remove fees, research other credit cards and see if you can get pre-approved. You will save money this way, which makes it easier to pay off the cards and get your credit utilization percentage to the ideal 30% or lower.

It is not likely that your credit card will get canceled if you are not using it. If you are worried that it is going to be, contact your credit card and ask them to leave it open. In most situations, they will prioritize keeping you happy. The only situation where it is certain that they will cancel your card is if you are not meeting your obligations by paying what you owe.

If My Card is Cancelled Do I Still Have to Pay?

If your card is canceled, you still have to keep making payments following the terms you agreed to when you applied for that credit card. Make sure you are making the minimum payment or more as agreed upon to prevent going into default and wrecking your credit score. Again, it may be to your advantage to apply for a credit card with a lower interest rate or better terms. Look for cards that do not charge a balance transfer fee. A new account may affect your score a little, but if you make payments and get the credit utilization down as quickly as you can, it could help you improve your credit score.

The information contained within this article was accurate as of March 27, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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tracy

About Tracy Farnsworth

Tracy Farnsworth went straight from a business track in high school to a full-time job in mortgage banking in Burlington, Vermont. After having children, she built a freelance career in content writing and took online classes as time allowed. She completed Social Media Marketing and Digital Marketing certificate programs with Ireland's online Shaw Academy and completed several courses in SEO and analytics. In her free time, she's the “mom” to a very clingy rat terrier, and the pair walk at least a mile every day. She's also a novice baker who is trying to master the art of sourdough bread.