Credit Might Be Drying Up - Should I Be Worried
A few days ago, Capital One about gave me a heart attack. I got an email from them telling me that my statement was ready. This made my heart skip a beat because I have not done anything with my Capital One card in over a year, and ever since I moved my balance to a 0% interest offer on a different credit card (and subsequently paid it off), I have not gotten any emails about statements or anything else of the kind. Until a few days ago.
I was scared that someone had gotten a hold of my card and used it, so I went to the website (by typing it into my browser, don’t click on email links you are unsure of) and found that I still have a zero balance and the same credit limit. I’m not sure why I was sent an email about my statement being ready, when there hasn’t been any activity or change in anything, but at least it was all okay.
And then I read an article about how credit card companies are cutting credit and closing inactive accounts. I have three credit cards, and all of them could be classified as inactive. One I haven’t had any activity on for about 4 years, the Captial One has been inactive for about a year now, and the last one which I opened to transfer the Capital One balance, hasn’t been used since February. In total, these three cards together have about a $70K limit. All of which is available and unused.
For a second I thought to myself, What then? Even though we have a small emergency fund it is nowhere near a true all-encompassing one, and what if a big emergency happened?
But then I realized, I didn’t actually care. If all our credit cards get closed because we don’t use them - I’m okay with that. I’d rather that than using the cards and feeling dependent on them.
Do you use your credit cards just to keep them from being inactive?
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October 30th, 2008 at 11:37 am
I have a Kay Jewelers store card from when I bought my wife her engagement ring. I sometimes put things on there because they give 90-days no-interest and who can complain about that (I always pay it off on time)?
Anyway, the point is that I find that the less I use it, the more my credit line gets increased.
October 30th, 2008 at 12:05 pm
Ugh, Capital One. I canceled them because they wouldn’t stop sending me blank checks every 3 weeks even after I asked a bunch of times. Seems they wanted to remind you that you haven’t spent any money with them lately, thus the note! They don’t like it when you don’t use their cards..
October 30th, 2008 at 12:08 pm
I have closed all the cards that are inactive that I have paid off. We have emergency money saved, if necessary. Credit cards would not be what we would use. It’s much better for me to close them and not worry about someone getting ahold of the information than having large credit limits available.
October 30th, 2008 at 12:51 pm
I think it is a good idea to use an unused credit card every once in a while, to prevent them from closing the line. When you cancel a card (or it is canceled due to inactivity), it will reduce your overall available credit. This can have an adverse effect on your credit score, because your credit card utilization percentage will be higher. If you are a responsible with credit cards (i.e. never carry a balance), it is a good idea to try to keep all of your lines open since it helps to maintain your credit score.
October 30th, 2008 at 1:14 pm
I collect airmiles on my card, so I usually use it if I’m making a bigger purchase, or like now when I’m doing a lot of Christmas shopping. But I always pay it off before there’s any interest charged.
October 30th, 2008 at 1:20 pm
I actually got a refund last week from a MasterCard which had a small credit balance on it because I hadn’t used it for months. I have a stupid amount of credit available compared to what I’ve ever used or ever intend to use. I’m tempted to cancel the most-unused card, but it’s also my oldest card, so I’m torn about whether to keep it for the sake of having a long, long credit history.
October 30th, 2008 at 1:28 pm
Yes, I do use mine to keep them from closing it. I’m young and will need to eventually get a mortgage, etc so I don’t want my oldest account going away just because I didn’t charge a pack of gum to it every six months. Of course, I also hate Capital One so I don’t use it for a large purchase–I don’t want to give them a big chunk of change from the 3% fee they’d collect.
October 30th, 2008 at 2:11 pm
I’m going ahead and trying to safeguard at least 2 of my cards, maybe 3. I already use my oldest card regularly and pay off the balance each month. My Discover is my next oldest so I did go ahead and use it in the last month. I have a super low 1.9% rate on purchases right now and a pretty small balance so I’m even considering paying only a bit over min this month and paying the interest so I show carrying a balance on their system. Don’t really know if that matters. Then I have a credit union Visa that is by far my best regular rate and I think I’m going to use that one too just to be safe because it is actually the card I would use to carry any significant balance since the rate is the best. Also like to keep the relationship with the CU as healthy as possible. I don’t think I’m going to sweat the rest. I have pristine credit so I personally think they’d be nuts but I also don’t have any CC balance so if they close ‘em or lower the avail credit, it won’t hurt me. Trying to follow the middle ground.
October 30th, 2008 at 2:48 pm
Capital One sends me 1 statement per year, even though I haven’t had a balance in more than 3 or 4 years on that card. I think it’s a way of reminding you of the card or something. It seems typical of them.
October 30th, 2008 at 4:53 pm
I do use my MasterCard monthly for online shopping, if I purchase medications etc and sometimes for big items, like car repair. Then I pay it off in full at then end of the month and also receive reward points which i cash in.
I feel more secure having a credit card available, just in case, even though I do have a small emergency fund.
October 30th, 2008 at 5:17 pm
I have a card from WaMu that I haven’t used in years but I leave open because of the free FICO score tracking. I would hate if they closed it out!
October 30th, 2008 at 7:42 pm
Used to. Eventually quit it: now I use only an Amex card and (rarely) a Visa card. Interestingly, old department-store cards are apparently still active, even though I’ve not charged anything on them for years, mostly because I decided I wanted no more than one or at most two bills to deal with.
Few businesses near the university will take American Express, so if I’m forced to eat out (which I resist most of the time) I’m likely to have to charge on Visa, since I don’t carry cash. That happens maybe once every three months. Guess it keeps the Visa card alive, which is better for my credit. They say you shouldn’t let existing accounts lapse, because of the benefit of a good debt-to-credit ratio. Amex has given me so much credit, though, it prob’ly doesn’t matter–I could go out and charge a Camry on that thing!
October 30th, 2008 at 7:50 pm
I’ve been trying to think of reasons, specifically emergencies, for which you might need a large line of credit. Immediately, medical issues came to mind. Then, I thought, well–could you just negotiate payments–maybe. How about a broken down car, furnace, etc. I guess you could either negotiate payments or just wait. Then, the obvious: if one loses their job. There should be $ for several months of living expenses–but that’s what emergency funds are for. I guess it boils down to whether you have a large enough emergency fund to cover the variety of big events that could happen. I suppose if you have that much in savings, then no need for credit… unless you need that FICO score.
Personally, even though we’re building up our cash reserves significantly, I really want to keep as high a credit line as possible “just in case”. Long ago, we had a really bad experience when we directly owed a business (a hospital of all things). They were horrible, brutal, etc., etc. I’d rather owe a credit card company any day.
October 30th, 2008 at 9:35 pm
I too have a Capital One card I haven’t used in awhile - 3 years in fact. Every so often I get that “your statement is ready” email and freak out. It’s not at regular intervals that I can tell, but after 2 or 3 of those I just stopped worrying. So you might get more. Don’t worry
October 30th, 2008 at 9:41 pm
I found it really interesting that I got an unsolicited credit limit increase yesterday on a seldom used (not at all in 6 months) credit card with a zero balance. I keep that one around for the credit rating and in case of emergency. I still found it very odd.
October 31st, 2008 at 6:39 am
I once tried to close a credit card account and found it almost impossible! I think one should have one credit card for those really big emergencies and for credit scoring purposes, but more than one would probbaly be a waste.
October 31st, 2008 at 7:45 am
I use my Mastercard (VISA once in a while when I hit the limit on the MC) a lot. I don’t like to use cash unless it is for small amounts. I have an automatic payment from my account to cover the full amount on my credit cards at the end of every month. This was the default option at my bank. If you wanted to carry a balance, then you needed to tell the bank up front when applying for the card. I was actually thinking about getting an AMEX card and using that instead to collect the AMEX points.
I think you should try to keep the credit cards alive. You could use them as deferred debit cards (which is how I use mine). If you pay them off in full, then you get to keep the money in your account for up to a month and collect interest on the money in the meantime.
October 31st, 2008 at 8:21 am
Supposedly, credit is going to start getting a lot tighter. You wouldn’t know that by looking at my accounts though - two of my CC companies have increased my limit twice already this year. I do want to keep them open just in case things do get worse though. Having available credit is not a bad thing as long as you are responsible with it.
The main reason I want to keep the cards though is b/c of the way my emergency fund is setup. My EF is in a high-yield savings account and it can take up to three days to withdraw money from it. If something horrible happens and I need money ASAP, I know that I can just use my credit card and then pay the balance off as soon as the transfer from my emergency fund is complete.
October 31st, 2008 at 9:37 am
Unfortunately, my EF isn’t anywhere near big enough for me to give up my credit line and Visa (the one my bank gave me when I went away to school). The credit line is sadly still holding my debt and I use the Visa card for automatic payments (to charity, hydro, etc.), so it stays active and earns me points. Even once I’m out of debt, I’ll probably keep them - at least in the freezer. You never know what might go wrong with these older houses.
October 31st, 2008 at 9:44 am
I personally don’t think anyone needs a $70K limit though. I mean would you really let yourself take on that much more debt under any circumstances? Because I’d sell my first born. Really, I would. But maybe that’s just because I’m really disgusted with my debt right now or maybe because I haven’t had my first born yet.
October 31st, 2008 at 11:20 am
One day in the life of your first born could cost you $70K.
October 31st, 2008 at 1:05 pm
Then good riddance.
November 1st, 2008 at 12:22 am
I definitely don’t use cards just to keep them active. If the companies with whom I have cards with zero balances want to close them, they are welcome to do so!
November 1st, 2008 at 8:57 pm
Good for you. Living without credit cards IS do-able. Scary, but do-able.
November 2nd, 2008 at 11:13 am
Nope. Once upon a time the wife and I were total slaves to credit cards (and still are in the strictest sense), but it’s always better to have credit dry up because you don’t use it than credit to dry up because you use it *too much.*
That being said, I believe your credit score is impacted by how long your lines of credit have been active. Meaning if you have an American Express Gold Card for ten years in good standing, it’ll look great on your credit report. Versus a capital one card that you were forced to open because your previous card closed out a year prior due to inactivity might not look terribly good.
November 2nd, 2008 at 8:28 pm
Moi, I’d be fine if AMEX and Visa canceled my credit. I never charge more than I can pay in a single month & I don’t travel, and so I’d just go back to using checks. It would be a nuisance, and I’d miss the annual AMEX kickback. But life as we know it wouldn’t come to an end.
If I my life were such that had to book airline reservations and lodging, though, I would not be happy.
November 2nd, 2008 at 9:01 pm
I would never get rid of all credit cards just in case I needed to book an emergency flight somewhere again (like the time I had to fly to the funeral of my best friend’s child, who died in a house fire).
Or if I needed to rent a car if mine were in an accident. It would end up being paid for by my car insurance, but they want your credit card number to begin with.
I don’t think anyone needs $70k on tap (unless your normal monthly expenses are in excess of $10k and you plan to use your cards as an emergency fund) but I’d pick and choose as to which to keep and which to close.
I’d vote for keeping 2 cards, one Visa and one MasterCard and make sure that at least one of them is the card you’ve had for the longest time.
November 3rd, 2008 at 10:21 am
I guess the question is why you need the cards to stay open. If it’s for building up credit (maybe for a future home purchase?), then it might be worth using them once in a while (maybe an autopayment?). But if you really have no reason to have them open (you already have a house), then I say let them close them. I’ve ever had a credit card closed for inactivity…