Not normally viewed as part of our "digital" universe, this is indeed the digital granddaddy of them all: the credit card.
It's all bits and bytes the moment you swipe the card at the grocery store, or hand it to the waiter in a restaurant. How much more digital can you get? Not much.
Trouble Afoot
For years I've been paying my credit cards in full, and only on rare occasions carried a balance--and then never for more than a few months. As a result I am not loved by the credit card companies, who in essence are continually granting me short-term, zero interest, loans, which I pay back on, or just before, judgment day.
True, the card companies do make some money from the discount rate charged the vendors (normally between 1.5 - 3.0%) but this is split between the lender (issuing bank), the card company (VISA, M/C, etc.), the processing company (who also may charge a flat $0.20-$0.30 fee per transaction).
The famous bottom line here is that evidence tends to show that it costs the issuing banks more to maintain your account, and lend you the short-term money, than they make from vendors through discount rates. And that is why we are currently seeing a rash of card cancellations, primarily from non-use.
Nowadays--the financial squeeze being on--it would behoove you to read the credit card agreements. Often they will include a clause giving the bank the right to cancel the card from non-use, normally 24 months.
Some banks have cancelled card that were used only eight months ago.
Credit Scores
Perhaps you have not used the card for two years, so what does a cancellation really mean to you?
It can mean a lower credit score.
One of the factors that determines your score is what percentage of "total available credit" (counting all active cards) you are currently using. If you have five cards with $10,000 limits each, that's obviously $50,000 total. If you carry a balance of $2,500 on two of these cards for a total of $5,000 then you are using 10% of available credit. That will never hurt your credit score.
However, if your issuing banks decide to pull the three "unused" cards, leaving you with $20,000 total credit, you will now be using 25% of your available credit, and that is sailing a little closer to the wind. Perhaps it will not affect your score, but it might. And if a cancellation of cards brings your percentage of total up to 50-60% it will definitely impact your score.
Use Your Cards
The solution is obviously to use your cards at least once every six months.
I normally charge everything to my credit union card (which I pay in full each month), but I also cycle through my remaining cards with a least one charge every six months, whether for groceries or an Amazon purchase, just to keep them alive. This way you will keep you total available credit intact, and you will remove the "out" of the credit card companies--for I have yet to see a in-use card cancelled for being paid in full each month.
That said, I just have a feeling that, as we speak, issuing financial institutions are researching frantically how they can legally cancel such--apparently money-losing--accounts.
A Sweet Deal
One of the sweetest deals in America today is the card you pay in full each month. Convenient, zero-interest loans. Must irk lenders no-end. I am surprised that they don't at least break even with the discount rate income, but apparently not, or they would not be so eager to cancel cards for non-use.
Don't give them this option; protect your digital credit line by keeping all your cards "active." And keep enjoying these zero-interest loans.
