PSA: Be Careful With Dormant Credit Card Accounts – They Are Ripe For A Shutdown

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Dormant Credit Card Account Shut Downs Increases During Pandemic

I wanted to put together a quick post as a PSA of sorts.  Having dormant credit card account shut downs is nothing new but the shut downs seem to be increasing, at least for me.  I have had two accounts closed on me without notice in the past 2 weeks, one from Citi and one from Fifth Third.  Usually a lender will send you a notice to tell you that your account will be closed in a few months if you do not use it.  But nothing like that ever happened, I was alerted to the closures via email after the fact or by creditkarma. There are a few reasons you may want to be aware of this and how you can avoid it.

Why Are Banks More Likely To Close Dormant Credit Cards Now?

So why the increase now?  What has changed?  Well a pandemic hit our shores and it grinded our economy to a halt. It looks like a recession is pretty much guaranteed, even if the stock market seems oblivious.

When recessions hit, defaults rise.  And one of the areas with the highest level of defaults will be credit card debt.  I think the banks are preparing for this to happen or at least being overly cautious to it.  You have seen it with American Express cracking down on approvals and their credit card limits.  Other issuers have reduced credit limits without notice. I think another step they are taking is closing dormant accounts.

They are doing it because those accounts are a liability.  I had around $10,000 limits on both cards.  That is $10K in potential risk for each bank.  I haven’t used them in years so why would they keep that risk on the books if they are not getting any benefit out them.  To be fair I can’t blame them for doing this.

Why Should You Care About Dormant Credit Card Account Shutdowns?

Why should you care about this?  To be honest I didn’t care much about it but others might for a few reasons:

Overall Credit Limit Drops

If you only have a few credit cards an account closure could affect your credit score negatively.  That is because your overall debt to available credit is considered.  If you have $30,000 in available credit and a card with a $10,000 limit is closed then your usage rate could spike.  That is because you are comparing your outstanding balance to $20,000 now instead of $30,000.

You Could Lose Rewards

If the card in question is the only card you have in a particular rewards family, and the card is closed, you could lose those rewards.  Let’s say you were holding a Citi ThankYou Preferred, with some ThankYou points in the account, just waiting until you are eligible for a Premier card offer etc. to unlock their value. If Citi was to close the card for being dormant you would lose out on any rewards in the account. That is because you don’t have another card in the ecosystem to transfer them to.

Average Age Of Accounts 

One of the areas that makes up your credit score is average age of accounts.  If you have some older no fee cards that sit in the sock drawer then you may want to keep them active to keep your average age of accounts up.  It does take 7 years after closure for an account to drop off, so even if you get hit with a dormant account closure it isn’t the end of the world.  But if it is one of your oldest accounts you will want to avoid a shut down to keep that average age of accounts up for the long run.

How To Keep Your Accounts Active

Now that we know you may want to keep these somewhat useless or forgotten cards active, how do we do it? Use them, duh 😂. There are a couple of easy ways to put this on auto pilot it if you want to avoid dormant credit card account shut downs.

Pay For Monthly Subscriptions

If you have some cheap memberships or subscriptions like streaming services or a donation to the troops etc. then put them on one of your sock drawer cards.  This ensures they get monthly activity and will keep you safe from a card closure.

Amazon Reloads

You could reload your Amazon account every few months for $1 with each card.  I believe Travel With Grant has this on auto set up too, so that is an option as well.  The regular charges will keep the accounts in the good.  The amount doesn’t matter as much as the frequencies.

Annual Fee Cards Should Be Good

I can not guarantee it but I think annual fee cards are pretty much always going to be fine. You will have the annual fee charged each year so that will show some sort of activity.  I have personally never had an annual fee card shut down for being dormant and I haven’t put a charge on my $49 IHG card in a few years.  If you have had a different experience in the past please let us know in the comments.

Final Thoughts

Hopefully you have a better understanding of why dormant credit card account shut downs could be on the rise. There are a few reasons why you may want to avoid a shut down and I gave you a few options on how to avoid it easily. If you don’t want to end up like me be sure to get some of them set up.

How do you keep your sock drawer accounts active?  Share your tips below.

Mark Ostermann
Mark Ostermann is a father, husband and miles/points fanatic. He left the corporate world after starting a family in order to be a stay at home dad. Mark is constantly looking at ways to save money and stay within budget while also taking awesome vacations with his family. When he isn't caring for his family or taking a weekend trip, Mark is working towards his goal of visiting every Major League Baseball ballpark.

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6 COMMENTS

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6 COMMENTS

  1. Three weeks ago I attempted to use a CITIZENS BANK mastercard for the first time since Aug 2018 (I didn’t recall it being that long since I last used it). The attempt was declined. After several calls, I finally spoke to a rep who said the account was closed the DAY BEFORE the attempt due to extended inactivity. That account had a low five digit limit. My bad. I immediately gathered ALL the cards I rarely use and over the next three days made thirteen (13) small (under $5) charges to thirteen accounts. I will continue to use each account at least once every three months. That should satisfy the banks. Charles

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