"My credit card was canceled!"
Question: Because I haven't used my oldest credit card for a year, HSBC says it's closing the account. I'm afraid this will hurt my credit score. Help! — Nevena Georgieva, Chicago
Answer: Credit-card companies lose money on dormant accounts, and as they feel the economic pinch, they're more apt to close them. Unfortunately, as you suspected, closing your oldest card can lower your credit score. The length of time your accounts have been open is the third most heavily weighed factor in your FICO score (after timeliness of payments and the amount you owe). Plus, eliminating a card reduces your available credit, which could also lower your score.
I contacted HSBC, and after checking your credit history, the bank agreed to reopen your card. Spokeswoman Cindy Savio says HSBC will consider reopening inactive accounts, especially if the account was recently closed and the customer had been with the bank for a long time.
Tip: If you have a lot of other cards and a credit score of 720 or higher, one closure won't have much effect on your score. But if you have a slim credit history and few cards, it's wise to make sure your oldest accounts stay active. So use your card at least once every three or four months. Then be sure to pay it off every month so you're not racking up big interest charges.
Having a financial nightmare? E-mail Donna Rosato at money_helps@moneymail.com.
I have terrific credit and have no credit card debt but did keep one or two cards in case I ever needed them. I got letters two months apart on both of them. Citibank and Discover that they closed my accounts. Here I read it is what they do. Remember when they begged us to open accounts with them? CHASE is the "worst"!!! Stay away from them. Watch your bills carefully. We could all make lots of money if WE started billing them!! As well, all the banks just got 700 billion dollars from OUR government to help us the home owners???? Don't you think it would have been a much wiser decision by the government to give the preferred families in foreclosure whose mortgages were $1000 (which was do-able)that escalated to $1800 per month and can no longer afford their homes, about $100K each toward their mortgages??? Think about it. If the government told them that they were receiving a credit of $100K toward their mortgages or some appropriate amount, the banks would STILL get the money!!!!! Thus, the bank got their money, the Americans were helped (ya know, like during wars when we help) and the taxpaying American who got screwed by the banks/mortgage companies would still have homes to raise their families in!!! Is it brain surgery or I am confused????
Barclays lowered my limit to less than $25 above my present balance. Had I not been paying attention, I would easily have exceeded my 'new' limit. It took them two weeks to get around to sending me a letter to notify me of the change.
Bye-bye Barclays!
Not true, Victor. Unsure about Ramsey, though that would certainly through his entire philosophy off track, since he pretty explicitly advocates NO CREDIT CARDS. But living in the USA without a credit card isn't unreasonable at all. I actually did it for five years just fine and had no problems. Got a new one, paying it off in four months because I realize that I preferred life without one. I don't mind paying in cash, using a debit card, staying within my means. Quite liberating actually. I've tried to convince my parents of this; they're finally coming around to my way of seeing things, and I rather say they agree with me on this one!
barclay just lowered my limit to below the balance and hit me with overlimit charge …. can that be legal
Alot of companies are freaking out as the Credit Crunch is hitting American High Street. We Americans consume alot more than we produce. Over 100 million households carry credit card debt.
And we are overly focused on FICO Scores. The solution to all of this not having High FICO Scores as that's just a measure of our Debt Ratio. We need to learn to consume less, earn what we buy and SAVE MORE $$. Here's a good blog to learn more about money management: http://community.shopaservice.com/category/money-savings/page/2/
I'm sure even Dave Ramsey has a credit card. Living without a credit card in the USA is plain unreasonable. Try renting a car with cash when on vacation. Credit is something that's essential in todays financial reality. Dave Ramsey's big thing is common sense spending and saving – not just getting rid of all your credit cards.
I had 2 credit cards canceled and 1 had the limit lowered on another. I couldn't get either of the closed accounts re-opened. I always paid off the entire balance each month. Both of the cards rebated 5% on gas, groceries and drug stores and 1% on all other purchases. When I called on 1 of the cards that was from Chase the lady said they were trying to get out of the cards with the 5% rebate. It had only been about 8 months since I had used the card. If you do the math I earned $500 on 1 card and $300 on the other and never paid a penny in interest. The charge to the retailer when you use the card doesn't come anywhere close to covering the 5% rebate. They can see that they are losing money. I still have 2 cards that pay 5% on grocery gas and drug and a GM card that earns 5% on all purchases. I've saved over $8,000 on purchasing GM cars over the last 10 years. Don't believe anyone that says pay with cash. I charge everything with a credit card, buy only things that I need and I never pay any interest. I always wonder when I'm standing in line in the grocery store and someone pays with debit or cash, while I'm earning a 5% discount. When gas was $4.00 a gallon that was .20 cents off per gallon.
One of my credit cards was canceled. (only used it a couple of times in the past few years).
Another credit card the limit was decreased.
a third credit card the interest rate went from 15% to 25%
I have not defaulted on any of my credit cards. Am I paying a higher interest rate because other people are defaulting and they are trying to compensate?
My WaMu card was cancelled too, but I still have access to my account online:
http://www.debthelp.tv/personaldebt/2008/12/chase-cancels-my-wamu-credit-card.htm
Use one credit card only…..and pay it off each month. Use cash as much as you can. I could care less what my credit score is. Never checked what it is and never will. It only matters if you borrow.
I have also just received a letter to cancel an unused credit card and was told by the issuing bank that they have closed the account and forefitted all my reward points we have accumulated. I was told they sent a warning letter which I have never received. I wonder if anyone else, dealing with Barclay’s Bank, has had this same experience.
____
This is why using a card for "rewards" is bogus. Those points can go away at a momements notice. Better start using all those rewards points now.
It's only a temporary drop when the card is cancelled. If anyone even knew how the scores were calculated, you could know how much, but as others have said, unless you are about to buy a house or car, who cares. We all need less credit avaialable to us.
What a farce! The only thing that matters really is that you are making a good salary and have held a job for a long time and have not had any delinquent payments. I used to open and close credit cards and bank accounts after like 3 months because they offered some freebie incentive to open it, but not really needing it would just cancel it. Never had a loan ever, and every single credit card bill has always been paid in full each month, and the one time I bothered to check my score was 780 which would qualify for any minimum interest rate loan. Thats all crap that you have to go into debt to raise your credit score. its a big dummy scam, don't fall for it.
People seem to me to be way too concerned about their credit scores. In 2002 (granted, a looser credit market than now), I got a market-rate home loan (5%) based on my five-year history of on-time payments on my one credit card. With a 20% downpayment and a fair price on the home, as well as 10 years of stable income, I was considered a good credit risk by a large bank.
Although I believe it is prudent to have a credit card in order to have some credit history, as well as for convenience when renting cars, making travel reservations, etc., it is not necessary to have multiple cards.
Trim your card portfolios to one or two cards, and use them regularly. Don't make life hard on yourself!
Remember that your credit score only matters if you need credit. So closing an unneeded credit card doesn't harm you. While a slightly better score may get you a slightly better rate, you can also get a better rate by making a larger down payment 
Why have a credit card at all? Pay cash, if you can't afford to pay for it outright, you can't afford it. If you need help, go to http://www.daveramsey.com
it will walk you how to live debt free.
your credit score goes down when you close an empty card because your total available credit goes down.. so for example, if you have 10,000 in available credit and have a balance of 1,000, your ratio of used credit to available credit is 10 to 1.. but if you close a credit card of 5,000, suddenly you're down to a 5 to 1 ratio and your available credit is reduced which hurts your score.. i personally keep 3 min. cards open and use them for recurring charges like my gym membership and my movie rental membership. this way they get charged $15-$20 a month and get paid off automatically through my online bill pay account.. mindless credit building with absolutely zero effort.
Why can’t consumer credit scoring be more transparent? I see explanations by consumer finance writers giving general % of how scores are calculated, which is helpful. But if information is generated that effects consumers financially, why doesn’t the law demand that credit scoring formulas be made available? Anyone should be able to calculate, based on hypothetical activity reflected in their credit history (take out a new loan, cancel a credit card, etc.) what their resulting score would be.
The same thing happened to me with my Wamu/Providian credit card. I have had the card opened for years and received a letter from Wamu saying they closed my account. I had the account for 6 years and kept it in perfect standing. I contacted them to have it reopened and they said they were unable to.
http://ultimatemoneyblog.com/thanks-a-lot-wamuchase
http://ultimatemoneyblog.com/my-credit-score-dropped-25-points
My credit score dropped 25 points from it.
This is ridiculous. The american public is asking for help, and all the government can do is schedule help to occur right before the 2010 election. It is outrageous. I guess if I ran a bank that was in debt a couple millions dollars, then the government might think of helping me out now. It's crazy; you work hard, and do everything to stay afloat, but they always find more ways to take your money…
http://www.intelligentamerica.blogspot.com
John from Fort Worth is right. I have closed all of my credit cards, and plan to live within my means. If you dont have the cash to pay for an item, you shouldnt be buying it. Imagine a life with no payments. In a bad economic time, imagine getting laid off from your job with no payments and a stack of cash. Would see alot less foreclosures when people plan for emergencies rather than living check to check. The heck with FICO!
Closing your credit card is just another way the Feds are punishing people for not buying.
So let them!
If you have to use credit..you're only building yourself into debt.
Learn to do with less in order to have more.
This is a ploy to scare Americans when really they are scared.
Buy American.
Use cash.
Do with less.
You will be better off!
I have also just received a letter to cancel an unused credit card and was told by the issuing bank that they have closed the account and forefitted all my reward points we have accumulated. I was told they sent a warning letter which I have never received. I wonder if anyone else, dealing with Barclay's Bank, has had this same experience.
Same deal with Chase. Hadn't been used in the past 24 months so Chase thought "it didn't meet out needs". Worried about what this might do to our credit score too even though it was 800+ in July.
We only used the Chase card once. First payment mailed 7 days out – balance in full. Payment applied the day after the due date and late fee charged. Know that it was received in plenty of time to apply on due date.
Now we use USAA for everything.
The same thing happened to me on my Chase account. I received a letter from Chase saying my account is being closed because I haven’t used it for 24 months. When I called, the representative told me there is nothing I can do about it.
I received the same type of notice from Citibank, but was given the option of "use it or loss it".
I am disappointed on how Chase decided to treat its cardholders.
I had the same thing with Chase. I had an account with a zero balance and they just closed it. No warning. They also took my points I had acquired for using the card. When I called they were very rude and said they can do want they want. It has made me question the possibilty of not ever doing business with them again in any fashion. I had been with them a number of years and never was deliquent. They say to use credit wisely and I always have. It makes me wonder if they want the people who use their credit unwisely and stay in debt to them. I also thought they had a very poor way of dealing with their customers who were in good standing with them. Whenever I see their name I remember the attitude on the phone and question why did they deserve my business to begin with.
I had this problem many years ago so now I rotate credit cards. I pay very close attention to balances and pay them off quickly. My credit limits keep getting increased without me asking. Multiple cards can create problems if not followed closely. The old saying use it or lose it is applicable here too. If you are looking to increase your credit go to http://www.123creditcardspot.us
I had a Chase Credit Card, too, and their customer service is atrocious. I have no doubt that they treated a customer that way. I have had credit cards with a few financial institutions and Chase has by far been the worst one I've ever had. Never again. Believe me, they did you a favor by closing your account with them, despite the small credit hit that you did take as a result.
Having more cards is a good excuse for people to be irresponsible with their money and then blame it on someone else when they can't make payments.
You are wrong. If you charge any amount on your card, you should not pay it off in one month, you should pay it off in two months, REASON: if you pay it off in one there is no "payables" history and it is not considered debt, per credit card standards. Two months shows a "history".
Dear John, Your score would go down because the history of that card would no longer be used to determine your score. If you had a card that was 10 years old with perfect history and its closed then thats 10 pefrect years of credit history that would be lost.
Gid, you either didnt shop around or are carrying to much Debt. I just bought a car 2 months ago and had three offers below 5%, ended up with 4.75%.
Most people don't realize this, but your credit score is is actually the probablility that you will default on a loan. The higher your score, the less likely you will default and vice versa. The absence of credit does not mean that you are not a credit risk…it means that the creditors do not know whether you are a good risk or a bad risk. This is the reason why you need credit from multiple creditors to have "good" credit.
What kind of world do we live in where who we are and what we can do in life comes down to whether or not "we keep our old credit cards active"? The person who said that he had to use his card to go out to dinner and then turn around and pay off the balance a few days later, proves my point. Instead of him just going ahead and paying cash, he was almost forced to use his credit card in order to keep his credit going, which kept his credit score higher, which allowed him to get goods and services at a good price in the long run. We have become slaves to an invisible god called Credit.
If the downturn of our economomy has not taught us many lessons, lets keep in mind that the credit card industry will find a way to make all of us dependent on them. Cash should be the rule of the day, and we should resist the easy temptation of plastic. The credit scores will have to be adjusted downward as no one, even will close to impeccable credit, will be able to obtain reasonable financing. Put the cards away and lets all spend within our budget.
John Smith, you purchased your house (I am assuming you own a house) with cash? I don't understand people who swear off credit (or credit cards) completely. I was taught a long time ago that if you use your credit card wisely it is a interest free loan. If you have the money sitting in the bank (granted with today's interest rates you are not earning much) when you make a purchase then your money gets to earn an extra 20-30 days of income before you pay your credit card statement. The impulse to spend does not happen because you have a credit card. That is just a lame excuse for those who have no self control.
They need to redo the way they evaluate the credit score. Even with an almost perfect credit score, I got a 10.1% on my car loan (no one else would finance me for some reason). Why? because I disciplined myself and used only 1-2 credit cards. They see it as 'not enough credit history' even though I've been using those cards for a few years.
I kind of see where they are coming from, but it doesn't seem that credit score matches to real world situations.
That doesn't make any sense. Why would your score go down becuase you closed a card? That just goes to show you that credit scores are a scam. I have one credit card witha zero balance. Our score is 780. Who cares anyway. We don't finance anything. There is no need to if you save for things you want and pay cash.
The same thing happened to me. I received a letter from Chase yesterday saying my account is being closed because I haven't used it for 24 months. When I called, the representative told me there is nothing I can do about it. They are closing all acounts that are not used. He said it will not be reported as a negative closure so it will not hurt my credit. I disagreed with him, but was basically told tough luck—reapply if you want a Chase card.
I had this same problem in the past. Now my wife and I use it as an excuse to have a nice dinner a few times a year. We charge it on the credit card and then pay it online a few days after. That keeps our old cards active in case we ever need them.
I am in the military and travel quite a bit. I have not had a credit card in many years. I rent cars, hotels, go out to eat… All with the use of cash or a debit card. So as far as not using a credit card being irresponsible I would say that is a big generalization. Why use something you don't need. Just pay cash. The chances of me ever getting charged for a late charge, 0%, my change of getting my card canceled, 0%, my chance of interest rate going up unexpectedly, 0%. I would make the argument that using credit cards are irresponsible, if you have to use credit that means that you were not disciplined in saving. Hope you like your payments!