Clark’s Credit Card Pivot: This Strategy Is ‘Not Working Right Now’

Have you been a longtime follower of money expert Clark Howard’s credit card strategy?

As credit card issuers change policies in 2024, Clark says it may be time to pivot from one of his longstanding pieces of advice.

He often tells people that making a couple of small purchases per year with a seldom-used credit card is a great way to preserve that line of credit and, in the process, keep your credit score strong.

But that strategy may no longer be sufficient.

“My ‘two times a year’ advice is not working right now with more and more issuers.”

During a recent episode of The Clark Howard Podcast, Clark heard from a listener who had been following that advice and still had his account flagged for review by his card issuer.

In this article, we’ll look at Clark’s reaction and explanation, as well as his revised guidance for what you should do instead in the current credit card climate.

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Clark Modifies Strategy for Keeping Credit Card Accounts Open

If you’re a rewards credit card fanatic who is often trying to maximize rewards, you probably know this scenario all too well: Do you have an old credit card tucked away in a drawer somewhere that you simply don’t use anymore?

It probably has a crummy interest rate or the rewards program has become stale. Either way, it has outlived its usefulness in your wallet.

But did you know that there’s actually value to your credit score by keeping that line of credit open and making occasional purchases?

For many years, Clark has advocated using that credit card at least twice per year to keep the account active. And, more recently, he even modified that advice to say that paying a small, recurring monthly charge (such as a streaming service) with that credit card would be an effective way to show consistent payment activity with your old card.

But, as we’re finding out from more and more listeners, even that strategy may not be sufficient.

Clark says many cardholders may find that their issuers are going to require a larger and more frequent use of their credit line to maintain the status quo.

During a recent “Ask Clark” segment, he addressed this issue in depth with a listener:

Listener Glenn in Florida Wrote to Clark:

“I’ve always followed your guidance to use my credit cards at least twice per year to keep them in good standing. I have one card that I use at least once per month. I just received a letter from them indicating an account review being scheduled because ‘the highest balance on this card has been significantly lower than your credit limit on this card’ and my credit limit can be decreased following a review.

The letter indicated I could opt out of this review if I anticipate spending activity to change by calling an 800 number. I called the number on the back of my card, not the one they provided. It took about 40 minutes on the phone to verify that letter was legit. I then called the 800 number provided and opted out of the review.

I’m wondering why this card was flagged. My wife believes it’s because I buy and then immediately pay for each item with bill pay. So when the statement arrives, it’s always a zero balance.

Our credit scores are consistently in the 830s. Any theories on why the ‘two times per year’ guidance didn’t work here?”

Clark Explains What’s Happening To Glenn:

“My ‘two times a year’ advice is not working right now with more and more issuers. Let me tell you what’s going on,” Clark said. “The number of people going delinquent and then having charged off balances on credit cards is rising right now. We’ve got, as I referred to it before, the barbell effect.

“[On one end] we have people that are doing really well financially right now, who are able to do what you’re doing. You’re paying balances in full and [the card issuers] got no interest from you. On the other end [of the barbell] you have people who are running into trouble with credit cards, not able to even service the interest, and then are being charged off.”

Clark says that this barbell pattern is different than the typical bell curve that most consumer behavior patterns fit, so there’s some unease among card issuers.

More specifically, they’re worried about credit card holders who have low usage numbers on high credit limits.

Clark says the paranoia about this type of cardholder stems back to The Great Recession, when otherwise good credit customers with high limits were losing employment and subsequently running up large credit balances that they ultimately defaulted on.

“If you’re using a very tiny percent of your credit, you’re creating ultimate future risk for them,” Clark explained. “So they’re saying, ‘Hey, you either increase your charge activity or they’re either going to send you a notice closing your account or they’re going to dramatically reduce your credit limit.’ Doesn’t matter you’re paying the balance in full.”

Clark Issues Some Updated Guidance for This Credit Card Climate:

Clark says this change in the credit card marketplace has necessitated a need for a change in his advice.

“So, in the past, I’ve said: ‘It doesn’t matter how many cards you have if you’re a rewards chaser and you’ve got 26 different credit cards or whatever.’ Not anymore.

“You need to become more purposeful and intentional about how you use your credit cards. Because if you don’t use a lot of them in any major amount, you’re gonna see those notices come that say the account is closed or that your limit is reduced by 90% or more where your limit was before.”

In most cases, Clark says this is going to require not only regular charging with the card, but a healthy use of your credit limit.

But, as always, Team Clark only recommends that you do this if you’re able to pay the balance in full each month. The benefits of these old accounts being active are not worth running up balances that will ding you heavily with a high-interest rate.

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Have you recently received a similar notification from your credit card issuer? We’d love to hear about your experience in the Clark.com community.