Inactive Credit Cards Lose Rewards

At least one major credit card company has put a new program in place: credit card accounts that are inactive for 13 months are being suspended and, around two months later, closed.

This is significant because suspended accounts, while not yet closed, are useless. They are restricted from all transactions.

A card associated with a suspended account will be declined if you attempt to make a purchase with it.

And, unless you act within a strict framework for redeeming any rewards on a suspended account, they will be lost.

DEFINITION OF INACTIVE ACCOUNT

An inactive account is one that:

• has no balance being carried over from month to month
• has not had a charge for six months or more
• has had no activity, not even payments, because there has been nothing to pay

If you are carrying a balance and paying off your account then, even if you have not put a new charge on your account for years, your account is not inactive. It has an active balance and every month there is activity, i.e. you make a payment.

NOTIFICATION OF SUSPENSION

Any customer whose account is inactive and subject to suspension is supposed to be sent a notification letter informing him or her of the process of suspension that is being initiated, and given sixty days during this suspension period to redeem any rewards points on the account before it is closed.

Once these accounts are closed, however, the rewards are forfeited.

So if you think you have some rewards in “old” accounts that you haven’t been using, check them out and get them redeemed ASAP.

CONSIDER USING INACTIVE ACCOUNTS

If you have an inactive account that has not yet been coded for suspension and you do not want it to be suspended or closed, then take action now, before your credit card company decides to suspend it.

• mark your calendar and charge one low-cost item every month, even if it’s just a cup of coffee or
• call in and find out what balance transfer offers are available and, if it makes economic sense, use one

I have been getting inquiries from customers with inactive accounts about balance transfers.

During this economic crunch people are looking around for places to borrow money, so they start digging up credit cards they have not used in a while and start checking out the offers on these accounts.

This is not a bad idea. Accounts that have been left dormant for a while can generate attractive promotional offers in order to get you to use the account again. (Remember that credit card companies make money off merchants as well - they get a cut of every transaction.)

Let a card go for six months without using it and you may get a very attractive offer. Let it go a year and you may well find it suspended.

So be sure to find out the status of your account before discussing balance transfers with a credit card agent.

INQUIRE IF ACCOUNT IS SUSPENDED

If you are considering getting a balance transfer, you must make a point of ensuring that  suspension is not pending on your account, that it has not already been suspended, or that the credit has not already been revoked.

From a customer’s point of view these two scenarios have the same result, namely that no transactions can be performed on the account.

There is little that is worse for a credit card customer than thinking that a financial problem has been dealt with, such as having a higher-interest loan paid off through a balance transfer, then finding out two weeks later that it never went through.

DO NOT DEPEND ON AGENT TO CHECK

Do not depend upon the agent you are dealing with to check this out. This kind of detail is actually very easy to overlook.

It is quite possible for balance transfers to be initially transacted on accounts that have this “suspended” status, only to be denied later.

It is also possible that an agent will transact the deal without properly checking whether or not the transfer has been approved.

ACCOUNTS CANNOT BE REACTIVATED

Two more points:

• Suspended accounts cannot be reactivated. Do not waste your time arguing about it.
• Once the rewards have been redeemed on a suspended account, close the account yourself. Do not let the credit card company close it by default. You cannot trust credit card companies to code these closings correctly for credit bureaus.
• The account should be coded as “closed voluntarily” or something to that effect.
• Call back a week later and ask the agent to double-check to make sure the closure was coded properly. An improperly coded closed account (one recorded as a default, for example) can negatively impact your credit score for years, depriving you of approval for mortgages and loans without your ever knowing it.

So, although it takes a few moments of your time to make sure your rewards are redeemed and your accounts are closed and coded correctly, do yourself a favor and do it. Be financially safe, not sorry.