Don’t Be a Target
Credit Card fraud hit a little too close to home yesterday. I received a call regarding a card that I kept in a safe deposit box. It had not been used for several years and cancelling it was on my list of things to do. Someone used it to check into a motel in California. The card is now cancelled.
As unemployment has increased, it has become more difficult to obtain credit. With that in mind, some people may choose to hang on to old cards “just in case” they lose their job and are unable to obtain a new card to use as a safety net. There are pros and cons to this idea.
Some credit card companies charge fees for dormant accounts. No one wants to pay fees on an account they are not even using, so that might lead you to close the account.
As my story shows, unused cards can also put you at risk for fraud. Fraud tends to increase in times of recession. This fraud can go undetected if you do check your statements regularly… especially if you move and forget to notify the company of your new address.
On the flip side, cancelling long-standing credit accounts may reduce the length of your credit history, which damages your credit score. (Having accounts with a long history increases a credit score, since it indicates stability and reliability). In addition, cancelling a card could increase your debt to credit ratio, hurting your credit score even more.
Decisions about old, unused credit card accounts require careful thought. If you are unsure if you have unused accounts, check your credit report. It will also help you spot unfamiliar credit applications and unexplained balances that would indicate that you are a victim of fraud.
Consider closing down unused accounts, especially if you are applying for a loan. If later you decide you need a credit card, you may find a better deal on the market that are available only to new card holders.
Remember that cutting up a credit card is not the same as cancelling it. Cutting it up will stop you from using it but you still need to contact the company and ask them to cancel it. Ask for a confirmation letter as well. Sometimes the account will be left open for a while in case any payments you’ve made haven’t come through yet. Double check a month or two later. ~Brenda