One of the factors used in calculating your credit score is your average age of credit. Keeping credit cards open as long as possible will help your credit score as long as you use the cards responsibly. But what happens when you reach the expiration date on a credit card? And what happens if you don’t use a credit card for a long time? Will credit cards cancel themselves? Let’s take a look at how closing credit cards works and see if credit cards can actually cancel themselves.
What happens on a credit card expiration date?
When you get a new credit or debit card in the mail, you will notice it has an expiration date on it. You actually use this expiration date when making some purchases when you enter that number or your card is read at a register.
This expiration date handles two important functions, but neither of them lead to closing your account. To make this extremely clear: your card expiration date does not mean your account will close.
The expiration date is used for two primary reasons:
- Transaction security
- Card replacement date
For security, the expiration date acts as another form of verification that the card is active and the transaction is not fraudulent. This keeps bad guys from stealing your card number and using it without your permission should they not also get the expiration date (and other important numbers like the three-digit security code on the back of a card).
Banks also use the expiration date as a time to send you a new card in the mail. Those plastic cards tend to wear out over time in our wallets or with lots of use. The expiration date is also a good opportunity for the bank to remind you about the card so you keep using it for regular transactions and purchases.
What happens to inactive credit card accounts?
Banks spend a LOT of money to acquire new customers. Because of this, they are not in a rush to close accounts, even ones that have been inactive for a period of time. But if an account sits idle long enough, a bank may shut it down.
In my history with cards (I have a lot of cards), the banks have shut down two of my cards for inactivity. Because I have a lot of credit cards, it wasn’t a big hit on my credit score. But for some people, that could have a significant impact.
To keep your accounts from closing, it is a good idea to use them at least every six months for a small purchase. Just a few weeks ago I pulled out a stack of cards I don’t use very often, put them in my pocket, and used them for small purchases over a couple of weeks to keep them active.
To summarize, credit card issuers will close inactive accounts, so keep your account active with a transaction or two every once in a while so you don’t run into any unexpected issues.
How you can close a credit card
It is never fun to have a credit card closed by a bank, but sometimes you may want to close a card yourself. If a card has no annual fee, it is better for your credit to keep it open as long as possible, as long as you use it responsibly and pay your balance in full every month.
You may want to make a change, however, if a card charges an annual fee that you don’t think is worth the cost. In this case, you should first try to downgrade the account to one with no annual fee. But if that isn’t an option, you may want to close.
To close a credit card, just call the number on the back and ask them to close the account. It only takes a few minutes and is quite simple. In the best case scenario, the bank may offer you a retention offer to get you to stick around. Those can be quite lucrative, so listen closely if you do get an offer before you close your account.
Keep a long-term credit focus
In the long run, one credit card shouldn’t make or break your credit history and credit score as long as you use all cards responsibly. Remember that credit cards are simply a tool that fit into your financial plan. They are not good or bad on their own, it’s how you use it that matters most.
It is never good to get your account closed by a bank against your wishes, but sometimes you may want to close one yourself. Just make sure you do the right things to put yourself in charge of that decision, not the card issuer.
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