Idle debit/credit cards closed or downgraded?

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oldcomputerguy
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Idle debit/credit cards closed or downgraded?

Post by oldcomputerguy » Mon Jun 18, 2018 2:34 pm

I've had a couple of interesting communications lately that I wanted to share. These both regard cards that typically are not used except when travelling, otherwise they stay in the safe at home.
  • We have a Fidelity Cash Management account, with my wife and I each having an associated debit/ATM card. The main thing this account is used for is to provide emergency ATM cash when travelling. In fact I used my card in May of last year while in Germany to pull some euros from a local ATM. My wife, though, has never used her card since it was issued. Last week, she received a letter from Fidelity, informing her that, due to inactivity on her card, when the cards hit their expiration date in September, rather than them issuing her a new card, they were going to close her card altogether (even though I had used my card, which is on the same account, last May). She was given the option to call and request that they keep the card active, which we did.
  • We have a Capital One Visa (zero foreign transaction fee) which is used for expenses while abroad. It was issued with a $30,000 credit limit. A few months ago, I received a letter from Capital One, telling me that they were lowering our credit limit to $10,000. The reasons given were:
    - Current account(s) not used enough for assigned credit limit(s)
    - Balances on non-Capital One revolving trade(s) are too low
All this leads me to wonder: is it pretty much normal for credit/debit card issuers to clamp down on card holders if they don't spend a certain amount on their cards in a certain time frame? I read through the Fidelity check card agreement, and it does say that "Fidelity, BNY Mellon, Bank, or you may terminate this Agreement, including the use of Cards or other Services, if applicable, at any time", but it says nothing about any minimum activity requirement.

(I'm wondering now if it would make sense to set up some sort of rolling schedule for spending a few dollars on each of our less-used cards, just to keep them active.)

Has anyone else here had similar experiences? Is this just normal for little-used cards?

As a secondary thought, any ideas as to what lowering the CapOne credit limit from $30,000 to $10,000 might do to our credit score?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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flamesabers
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Re: Idle debit/credit cards closed or downgraded?

Post by flamesabers » Mon Jun 18, 2018 3:09 pm

I don't think there is anything unusual with either situations. Unused/underutilized cards aren't advantageous for banks to keep open (or with such a high credit limit) as they are liabilities that don't generate any income.

For keeping unused cards active, I think a good rule-of-thumb is to use them at least once every six months. I created reminders on my Google calendar for using sock-drawer cards.

In regards to the impact of Capital One's downgrade, I don't think it will have any significant effect assuming it doesn't cause your utilization ratio to skyrocket.

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oldcomputerguy
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Re: Idle debit/credit cards closed or downgraded?

Post by oldcomputerguy » Mon Jun 18, 2018 3:16 pm

Thanks. The lower credit limit really won't impact our use of the card for travel, it just struck me as coincidental that these two happened fairly closely to each other, and I was curious.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

arf30
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Re: Idle debit/credit cards closed or downgraded?

Post by arf30 » Mon Jun 18, 2018 3:25 pm

Capital One decreased the limit on my Quicksilver card from 20k to 12k. I rarely use the card and only noticed because my credit score dipped a bit from my overall credit limit decreasing. Fidelity and Schwab (and probably every bank) will also trim inactive or rarely used accounts after about a year in my experience.

bac
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Re: Idle debit/credit cards closed or downgraded?

Post by bac » Mon Jun 18, 2018 4:29 pm

Citibank abruptly shut my AT&T Universal Visa account, which I hadn't used for more than a year, in favor of cards that provided rewards. Sad to see it go, because I had it for more than 20 years. Credit score didn't really take much of a hit, if any.

I had a Target Visa card, which also didn't get used much. I was sent a new one, but the credit limit was cut from $5000 to $200. I was told it was a security precaution, but, not enjoying being jerked around, told them to close the account.

ft2010
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Re: Idle debit/credit cards closed or downgraded?

Post by ft2010 » Mon Jun 18, 2018 6:48 pm

Last year I received a letter saying a credit card would be closed due to inactivity by a certain date, irrespective of whether I start putting spend on it or not. Upon further inspection, it turns out I have not used it for 2 years or so. However, since that is actually my oldest card and first card with the bank, I called and eventually spoke with a supervisor who authorized to reverse that decision. The card remains open and I have learned nowadays to put some charge on it from time to time.

drawpoker
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Re: Idle debit/credit cards closed or downgraded?

Post by drawpoker » Mon Jun 18, 2018 7:23 pm

I don't think there is any common, or universal, policy in place among Mega Banks on how they handle this. Seems like they are all over the map. In the past few years, have had the following experiences with cards I haven't used.
BOA - Abruptly cancelled a long-standing credit card without notice and prior to expiration date. Would not have even known about it except I spotted it as "closed" while checking my credit report. Called to complain, CSR just blew me off, basically saying "that's how we do it", tough toenails.
Sears MC - Sent me a friendly letter saying if I didn't use it they would downgrade limit from $11,900 to like $200, or $500, can't remember now. Really. Called CSR #, spoke with a very nice gentleman, asked if they could offer me any incentives to use the card more, he checked, nope. So, I charged $5 worth of stuff at the drugstore, and we seem to be back on good terms, haven't heard another peep out of them.
Discover - similar, letter urging me to use card, called and asked them, what can you do for me, give me some incentive why I should. They then immediately offered me 0% APR on everything for the next 12 months. Yup.
Chase - Strangest of all. The letter not only said card would be cancelled as of expiration date but I was certainly "free to use the card up until the expiration date when it will not be renewed". Called, asked the rep "Aren't you people at least going to give me a chance to keep the card especially if I start using it ? Guy was very nice, apologizing for the "inconvenience", said the account would remain open, assured me a new card with a new expiration date would be put in the mail.
Well, the new card came with another 3 years tacked on. But now I am getting emails from Chase saying if I don't use my card soon it will be cancelled.
:annoyed

Austintatious
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Re: Idle debit/credit cards closed or downgraded?

Post by Austintatious » Mon Jun 18, 2018 7:35 pm

DW recently received a letter from Cap One advising that the credit limit on her cash reward cc was to be lowered due to inactivity on the card. They're right, of course, in saying that the card has been inactive, that, simply because the 1.5% cash rewards offered with that card is no longer competitive. We've not noticed a change in her credit score associated with the reduction.

mhalley
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Re: Idle debit/credit cards closed or downgraded?

Post by mhalley » Mon Jun 18, 2018 9:24 pm

Clark Howard did a recent podcast discussing this. Many cc are reducing their liability because defaults are increasing. Perhaps his advice of using a card twice a year for a small purchase is no longer valid and you need to use them more often for larger amounts to maintain the credit limit.

itsgot8
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Re: Idle debit/credit cards closed or downgraded?

Post by itsgot8 » Tue Jun 19, 2018 9:38 am

I have had two separate credit cards closed in the past by the issuer due to no activity. One CC was from one of the major banks and the other was a Best Buy card that was through Citi. I didn't mind as they were cards that were obtained due to financing incentives and I no longer had use for once the balances were paid off prior to the promotional period ending. However, it served as a good lesson to not let any of my CCs that I have the longest credit history with, get closed due to inactivity. I now make sure to make one or two purchases within a 12 month time frame.

The reducing of the credit limit is new to me though.

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