If you're going to go to the trouble of opening a credit card account, you likely would prefer that it not be closed out from under you. Especially because closing a credit card account can hurt your credit score. This isn't a guarantee -- there are a lot of factors involved, including the age of the account, the credit limit, and how strong your credit score is otherwise.
For example, I closed my oldest credit card account earlier this year, and lost a measly two points from my credit score -- but the account had a low limit and my credit score is over 800, so this was no big deal. But I recently received a letter from another card issuer noting that my current oldest account was in danger of being closed, so I had to act fast to prevent that from happening and keep its decent credit limit as a part of my financial profile.
Here are four reasons why a credit card issuer might close your account, as well as a few tips to keep your credit cards in good standing.
1. You're not using the card
This was the reason I was just threatened with an account closure. It had been over a year since I paid off that credit card, and I hadn't used it since. It's not ideal to have credit cards that you don't use, but since some cards are good for a certain type of purchase and not others, you might have a few that you only break out on infrequent occasions. As for my card, I've had it so long that its benefits have changed. But I still keep it for the age of the account. And because it has a solid credit limit, it lowers my credit utilization ratio.
If you're not using a given credit card, it makes sense that the issuer would be inclined to close the account. After all, it's not making any money from you in the form of interest charges, and it's also not making money from swipe fees at merchants where you make purchases.
2. You're not making payments on your balance
If you stop making payments on a credit card with a balance you owe, you could find yourself with an account closure. If a card issuer doesn't think it'll be paid back for the money you borrowed, it'll close your account to keep you from making additional purchases with the card. If you default on a credit card, you'll also find yourself in trouble when the card issuer turns your account over to collections. Your credit score will take a substantial hit along the way, too.
3. Your credit score dropped
If your credit score drops significantly, it could impact your open credit card accounts. According to Experian, card issuers periodically check cardholders' credit scores to see how they're doing with debt management. A check might be spurred by a missed or late payment, so if you think your card issuer doesn't notice (other than charging you a late fee), you're wrong.
4. You breached the terms of your card agreement
Remember all the paperwork you received when you opened the account? A lot of it dealt with terms and conditions in the cardholder agreement, and by getting that card, you were agreeing to abide by certain rules about how you'd use the card. This includes the rewards program -- misusing it (such as by excessively making cash-adjacent purchases like gift cards to earn more rewards) could result in an account closure.
How can you keep your credit cards in good standing?
For starters, if you're struggling with your finances (maybe you got laid off or are otherwise facing an income drop), reach out to your card issuer for help. You may qualify for a hardship program that lets you make smaller payments or even pushes them off altogether for a period. This is far preferable to pretending you don't owe money and ending up in collections.
And if you've been a bit lax about using some of your credit cards, the solution to avoiding an account closure is to simply use your cards. Don't use them to make purchases you can't afford, but if you need or want to buy something anyway, use the card that's gathering dust and then turn around and pay it off again. When I heard from my card issuer that I had 30 days to keep my account from being closed, I hopped on Etsy and bought myself a little something. Then as soon as the charge officially hit my account, I paid it off. No muss, no fuss.
It's a good idea to regularly review your open credit card accounts to be sure you're up to date on payments and don't have any suspicious charges that could be a sign of fraud. Doing this can also ensure you're not at risk of having an account closed by the issuer.
