PHILADELPHIA (CBS) — People trying to save money may stop using their credit cards to keep from racking up debt. But going cold turkey on a card may actually damage your credit score.
Jen Murphy, a mother of two, is expecting her third child in April. She spent months paying off the balance on her Wells Fargo Visa credit card.
“Our intentions were to save it and keep it like an emergency card and also to help with some of the costs of when the baby comes,” Murphy said.
But then she got a letter from Wells Fargo. According to Murphy, “They had closed out my account for inactivity because I kept it at zero balance and didn’t use it.” Six months of card inactivity was a leading factor in their decision to cancel her card, along with balances on Murphy’s other loans.
Banks cancelling inactive cards is common and Experian’s Rod Griffin says losing that spending power can hurt your credit score.
According to Griffin, “When you close an account, you lose the available credit for that account and so you have less available credit in total.”
Murphy’s credit score did see a small drop after she received the letter. She says “it went down to 728.”
Most banks don’t specify what length of inactivity will prompt a closure. Griffin says inactive accounts cost banks money to maintain, so if you want to keep a card, use it. Griffin says, “So make a small purchase, $10, $20, $30, turn around and pay it in full each month.”
Wells Fargo says one purchase a year should be enough to keep an account open, and customers are generally given advanced warning of a cancellation.
But in cases like Murphy’s, where additional reasons for the closure were also given, it could come without notice. She says, “This was like our safety next card and now we don’t have it.”
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