Failing to renew an expired card doesn't automatically shut the door to your credit line. According to LowCards.com, card companies put expiration dates on your card because of wear and tear and to reduce fraud by identity thieves. The approaching deactivation of your plastic affords you and your card issuer pause to assess whether you should still have access to the company's credit.
Your Card Issuer's Assessment
Typically, your credit card company reviews your account and even overall credit record when your card is about to expire. If the company deems you to be in "good standing"-- generally you're current and pay on time--you'll get a new renewal card before the old one expires. When you receive the new plastic varies by company, though you can typically expect it in the month before your current one expires. The company's review may determine whether it will raise or lower your interest rates or credit limits. If you've been late or not current, the company may close your account if it hasn't already.
Closed for Inactivity
Depending on your agreement, your company can shut down the account because you've stopped using it. CreditKarma says you don't need to carry a balance to keep the account alive. One way to keep an account active is to charge small fees to subscribe to magazines or video streaming services.
If you wish to close your account, don't just wait for the expiration date to pass. Generally, card companies require that you call or write to close the account. You can find the phone number and address on your credit card agreement or your card issuer's website.
Consequences of Closing Accounts
Charges Stop, Debt Continues
After you or your credit card company closes the account, any future transactions -- including automatic bill payments -- are declined. You're still on the hook for the balance owed, but you don't have to pay the full amount at once so long as you remain current and pay on time. In other words, your payment terms don't change just because you closed the account.
Impact on Credit Score
A closed account can lower your credit score. The Fair Issac Corporation, or FICO, bases 30 percent of your credit score on the percentage of available credit for you to use. According to CreditKarma, you lose that cushion when you close an account. This means you have a higher ratio of debt owed to credit you can use; it looks to credit card companies that you're close to maxing out on credit cards and that you may have financial or debt management problems. A high credit utilization rate results in a lower credit score.
- MyFico.com: Amounts Owed
- CreditKarma: How Closing Affects Your Credit Health
- CitiBank: Sears Credit Card Options: Frequently Asked Questionsrd
- TD Intelliresponse: Replacing Expired Credit Cards
- Bank of the West: Personal Banking: Credit Cards -- Consumer Card Agreement
- Randolph-Brooks Federal Credit Union: Master Card Frequently Asked Questions
- Great Lakes Higher Education Foundation: Why Credit is So Important
- Credit Karma: Credit Scores: Keeping Credit Cards Alive
- LowCards.com: Why Do Credit Cards Expire; Bill Hardekopf
- Suntrust: Credit Card Account Agreement