After 6 years in the credit business, you start to get used to credit card companies occasionally burning customers by raising their rates or instituting crazy new terms. It’s not often that a credit card issuer will do something so bad that it gives even a hardened credit expert pause.
If you haven’t already heard: Macy’s agreed to give Citi access to their inactive (24-48 months without a purchase) cardholders. Citi used this opportunity to mail out letters in July to the users notifying them that, unless they opted out, they’d be getting a new Citi card in the mail. The cards are starting to hit now and the story is surfacing. Consumerist.com has the best details so far.
It’s fairly common to see retail cards transfer to ownership with a larger bank. For example: your Nordstrom card may become a Nordstrom Visa through Chase. But in these cases, the tradeline record on your credit report is just updated. This Macy’s/Citi situation doesn’t follow that pattern. Instead of the card transferring, they’re actually closing one account and opening a new one.
This is a particularly low blow and a very weird marketing strategy. Using an opt-out mailer as an opportunity to establish new accounts? Without verifying addresses? Sure, they can legally do it under the fine print of the consumer terms agreement but this is definitely a step too far.
From a credit score standpoint, the impact of these new accounts could be severe. Your credit score could be harmed by:
- The closure of the old Macy’s card. Especially if the card was one of your oldest or one of only a few card you had open.
- The inquiry for the new Citi card. This will remain on your credit for two years.
- The opening of the new Citi card causing your average credit account age to drop.
- The new Citi card having a lower credit limit than the old card.
Even if you close the Citi card as soon as you receive it, it’s possible that the account has already been reported to the credit bureaus. Closure won’t delete the record, it will still remain on your credit history for 7 years.
Are you a Macy’s cardholder whose account was closed and replaced with a Citi MasterCard? If so, we’d love to hear your story. Post your comments below or send an email to email@example.com.
Emily Davidson – Credit.com‘s Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.