Please read this article about auto-activation at the Consumerist.com if you are in doubt about credit card activations and what can happen.
I personally re-wrote and maintained a program to auto-active card members at a major nation-wide card issuer. I can tell you that auto-activation was a standard practice at said card issuer. I will refrain from naming who that card issuer was. My advise to you is to close any credit card accounts you do not use. This advice comes to you from someone who used to work for a major card issuer. I'm not sure if that particular policy is in place but why risk it?
Seriously, I used to think (like many of you probably do) that major corporations have risk management policies in place and are focused on your security. I can tell you that managers in search of profits are not very concerned about your security.
In all seriousness remember this: corporations are staffed by human beings. Many of these people have their interests (bonuses, raises, promotions) ahead of the interests of the customer. I have always advocated that you close any credit cards you do not use. I'm being completely honest with you when I tell you about mistakes, errors and other issues that a credit issuer makes. These are usually human errors that are made by human beings. These human errors are inherent in the automated systems that the credit card companies use.
Mistakes happen people! They happen all the time. It is in your best interest to close unused credit cards. The sooner you close them the sooner they will eventually fall off the system and reduce your chances of mistakes like this happening. Don't working about your FICO score. Who cares about that. You want to protect yourself from the hassles of identity fraud and/or theft.
In my opinion credit cards are a useful device. I use mine all the time because of the rewards program, extended warranty, charge back ability and many other reasons. Credit cards are an awesome tool for consumers if used correctly. However, if you have one you are not using, make sure you close it so that you prevent any problems. Personally, I've made money from my rewards program. I pay off the balance in full every month, yet I still reap the profits of the rewards system.
I've also had to dispute fraudulent charges several times. However with my current credit card issuer I've had nothing but good experiences. They have saved me a lot grief (and money) while at the same time allowing me to earn a decent payback from their services. I have in fact made over $1,800 from them over the course of my membership. No late fees, no penalties, just good experiences.
Now to the dark side of credit cards. In the case mention at the Consumerist it was a "perfect storm" of coincidence that led to the foul up.
I've worked with enough customer service reps to now that mistakes happen all the time. As much as I like using credit cards as a tool, I also know that they can be a pain. You have to be firm with credit card companies. Talking to a manager will usually help. They care a lot more about their jobs (status, title, etc) than a run of the mill rep does. Talk to a manager. Talk to the fraud department. Talk to their compliance officer. If that doesn't work contact the Attorney General of your state.
Another issue brought to light in the article is that mail theft or simple post office error will put your information in the hands of neighbors. This is very true. Your online transactions are (usually) safe. However, simple mistakes by the post office or mail theft are a very big problem.
I've discontinued all physical mail delivery whenever possible. Have your credit card and bank statements sent electronically. Usually they will just send you a notice when your statement is available. Viewing your statement via a secure connection is better than having it sent to you via mail.
Credit cards are useful because of their features not in spite of them. Use them to your advantage. That's what the wealthy reader does.
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Comments
5 Comments so far
Thanks for the information…looks like this is another way credit card companies try to maximize profit at the expense of their customers.
I'm not going to cancel my unused credit cards, as you suggest, because of the negative affect it will have on my FICO score. I do care about my credit score, and I don't think the likelihood that I have to deal with a stolen credit card does not outwiegh the drop in my credit score brought on by canceling my old unused credit cards.
Jeff,
You know your situation best. I personally have no need of credit in the foreseeable future so FICO matters very little to me at this point.
The thing to keep in mind is that no one outside of Fair Isaac really knows what the FICO algorithm is so we can't say how much closing these accounts will really matter. It's also nice and convenient for the credit card companies as they use this a selling point for keeping accounts open.
As far as theft of your accounts it happens all the time and its usually not the card holder's fault. Usually its a security breach at the company, for instance a contractor loads all the credit card information onto his laptop and then that laptop gets stolen from his car.
I just don't want the hassle of dealing with identity theft. For me the risk of identify theft far out weighs any impact to my FICO.
Thanks for the comment!
I just received notice from Citibank that they were going to automatically issue me a new credit card account. It was under the guise of changing a previous account from Mastercard to Visa, the problem is that my previous account is closed.
So, essentially I received notice that CitiBank just automatically signed me up for a new credit card account. At least they gave me the ability to call and stop the process.
Is this type of auto-issuing scheme something that we will be seeing more of in the future?
Jeff,
At my former employer, we could only automatically reopen an account if the bank itself closed the account. If the customer closed it, then you needed the cardholders OK to re-open the account. I'm not sure if this was a regulation, law or just a policy. Sometimes those issues can get pretty murky. We had a compliance department to deal with those issues.
I'm not sure what Citi's policies are. It could be a mistake. It could be a new campaign to increase the number of card holders. I'll do some research to try to find out if anyone else has had this happen.
If any readers have experienced this, please leave a comment. I'd be curious to find out more.
Thanks for the information.
In my case, Citi closed the account about 2 months ago (due to 49 months of inactivity). Looks like it is a standard practice then, albeit, one that I haven't seen before.