Close dormant accounts to combat fraud and protect credit status

25th April 2010

Credit reference agency, Equifax, is recommending consumers take a look at how many credit cards they've got in their wallet and consider closing any 'dormant accounts'. If they fail to do so, Equifax believes there is a double risk of fraud and a lower credit rating.

However, cutting a card up is not enough. This simply stops you using it but does not close the account – instead you need to call up the card company and tell them you want to cancel.

According to research from consumer comparison website Uswitch in 2009, as many as 16 million people have more than two credit cards they no longer use, with 7% of these people having up to six redundant cards.

Neil Munroe, External Affairs Director, Equifax comments "People may be keeping old accounts open as a backup during these uncertain times" said. "Indeed, recent research* shows that 50% of consumers we surveyed on their credit card habits said they had four or more credit or store cards. But this could be damaging their credit rating – and putting them at risk of fraud without them even realising it!

"39% of those surveyed said they have been declined credit in the last 12 months, which they believed was down to having a poor credit rating. Having a number of dormant accounts won't have helped their situation.

"People may not realise that all their credit card accounts appear on their credit report and in the current economic climate lenders are likely to look less favourably on someone with a number of open accounts. So we advise consumers to take stock of all their accounts and close any that they don't use regularly. This will increase their chances of gaining credit in the future and protect them from the risk of fraud."
Criminals often target dormant card accounts as they tend not to be checked regularly, so any fraudulent activity may go unnoticed for long periods of time. With thousands of pounds of unused credit available on these dormant accounts, they are an easy target for fraudsters, so Equifax is keen for consumers to take action and review their accounts.

Another reason to close down unused accounts is the prospect of firms charging customers for not using their cards.

Peter Harrison, credit cards expert at moneysupermarket, says it expects to see more providers introduce dormancy fees in the future. “It costs card firms money to issue and maintain cards and they are required to set capital aside to cover your credit limit,” he explains.

From 1st October 2009, American Express introduced a £20 annual fee for customers who failed to use its Platinum cashback credit cards for a year. Lloyds TSB charges a £35 dormancy fee after six months, and some Santander cards levy £10 a year if the card isn’t used for 12 months.

Compare deals