You’re about to make a purchase when you notice your credit card expires this month. Don’t panic! You’re not alone.
Credit cards generally expire every three to four years from the date of issue. So, since this occurrence doesn’t happen too often, people tend to forget about it until the actual month of expiry.
If your credit card is expiring this month, it will continue to work until the end of the month, and a new card should automatically arrive in the mail. You should typically expect the new card a few weeks before the expiration date. Rarely is it required to take action to get a new card, but if it does not arrive in the mail, call your credit card issuer.
And don’t worry, although your card will expire, your credit card account will not. Your account will remain active until you cancel it with the issuer.
Why do credit cards expire?
Physical cards expire for a few important reasons:
- A credit card’s technology can quickly become outdated and using older technology can make a card vulnerable to fraud.
- Limiting the active “life” of a credit card with an expiry date helps reduce fraud and identity theft.
- Plastic credit cards deteriorate with age. Transactions requiring an insert or swipe of the card can take a toll on the material and may cause cards to break.
The good news is your new card will have the same number, and you may even become eligible for new special offers and products from the card issuer.
How do I activate a new credit card?
When your new credit card arrives in the mail, it usually comes with the details of your credit cardholder agreement. The card will also have a sticker on it with a phone number to call for activation. Once you call, the new card is typically activated instantly through an automated system, and you likely won’t have to speak to anyone if you are calling from a number on file. Some issuers even have the option to activate a card by going to their website.
At this point, you should destroy your expired card to prevent identity theft and fraud. While the card can no longer make transactions, your name and the card number can still help an identity thief establish a new identity.
Next, if you’ve authorized automatic charges to your account (bills, subscriptions, etc.), notify those merchants of your new card expiration date and three-digit Card Security Code (CSC) — also known as a Card Verification Code (CVC) or Card Verification Value (CVV) — located on the back or front of your new credit card. You can update your online payment profiles immediately, or as you make purchases.
What happens if I don’t activate my new credit card?
If you haven’t activated your new credit card, you won’t be able to make any online or in-store purchases until you do.
But, since your credit card account is still active, you will still be legally liable for any automatic charges from merchants. This means you could incur penalties, interest, late payment charges, and possibly harm your credit score if you don’t manage your account. Typically, merchants will notify you if they have an issue charging your card, prompting you to provide them with another method of payment.
What happens to my credit score if I don’t activate my new credit card or cancel it?
When you close a credit card account, your credit score may be affected slightly. With credit cards and credit of any kind, the length of time the account remains open is a key factor in determining your credit score. So, if you’re cancelling your oldest card, this may be something to consider. Though, the account will stay on your credit history seven years after you cancel it.
When you cancel a card, you are also decreasing your overall available credit, which could impact your score depending on how much credit you use. To maintain a good credit score, you should keep your credit utilization ratio below 30% – meaning you should use less than 30% of your total available credit. So, if you have two cards with a limit of $5,000 on each, you have a total limit of $10,000. And, if you generally have a $2,000 balance every month, you are currently using 20% of your total available credit. But if you cancel a card, you will lose that available credit. Your credit utilization ratio will become 40% if you continue to carry a $2,000 balance per month on the single card.
Again, automatic charges will continue unless you terminate them with the merchant.
Should I close a credit card account before or after the credit card expires?
It doesn’t matter when you close your credit card account if you pay off the balance upon cancelling.
Recently, an Ontario man discovered an unpaid credit card bill for less than a dollar significantly impacted his credit rating. Missed payments remain on your credit report for six years. So, this story is a good reminder to check and make sure your credit card is closed successfully. You can do this by calling the credit card provider or ordering a copy of your credit report.
If I cancel a credit card, should I get a new one?
If you cancel a card and intend to apply for a new one, look into a card that ultimately benefits you in some way. Whether it’s travel points, cash back, or even a low-interest rate, many credit cards have additional perks that can suit your lifestyle. The last thing you want is to sign up for a card that does nothing for you.
This post has been updated.