Help a Reader: “Dear Best Buy” edition

Yesterday a reader reached out to me with a very interesting dilemma. I’ll share some thoughts here and open up the comments for your collective wisdom:

Dear Nick Today I received a letter in the mail from Best Buy letting me know that due to lack of activity they will be closing my CC account on Feb 20th. Because they would like me to keep my card active they included a 10% off coupon to be used on my next purchase. My question to you is do I want to keep that card active or do I let them close it on me since I never use it? Looking forward to your reply.

This is a fantastic question. To be clear, though, it’s impossible to accurately answer what’s best for this reader. I’d love to, but it’s impossible for me to give “advice” here. I’m also just a regular guy with a passion for this stuff, so my opinion is probably not worth much. But I’ll give my thoughts, some relevant considerations and then what I would do given the facts in the question and the assumptions I mention here.

Considerations:

Closing credit accounts affects your credit score, which is made up of a number of factors including length of credit history (15%) and amounts owed (30%), which includes “proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).”

So closing credit accounts that you’ve had for a long time changes the length of credit history on your credit score (generally the longer the accounts are open the better it is for your credit assuming you charge little and pay on time).

Also, closing accounts reduces available credit, so it makes the “proportion of credit lines used” less attractive (with lower total credit available the balance becomes a bigger percentage).

As a result, closing credit accounts could have a negative effect on your credit score, especially if it’s an old account with a high balance. That’s why most financial advisers will tell you to stop using accounts but leave them “open.”

Now, most store cards have relatively low limits, so usually that’s not often a big issue, especially if you don’t charge a lot on your other cards. But if the store credit card is your oldest account, for example, it could have a negative effect on your “length of credit history.” The good news is that length of credit history is a relatively small percentage. Also, as time goes by the other open accounts get older, so it’s also not usually a huge deal for one account.

This all begs the question of whether your situation really calls for high credit scores. If you are debt free with no real desire or need to borrow again it’s even less likely that closing the Best Buy card matters much. If you’re trying to “build” or “repair” credit, then it starts mattering a bit more.

Also, while not directly related to your “credit score,” insurance companies often look to your credit “report” when setting your premium. The better your report the lower your premium. See here for a discussion on that.

Here are my reactions if I received that letter.

Dear Best Buy

“Fun guy Nick” would want to take a picture of me from the same angle as the picture at the top of this post and print it out on a sheet of paper. Then I would turn that page over and reinsert it into the printer so that the following letter would print on the other side:

Dear Best Buy:

Thank you very much for your letter dated January 19, 2012, in which you express your sincere gratitude for me handling my Best Buy account so responsibly over the years instead of charging a whole bunch of crap I can’t afford, leaving you stuck with an uncollectible balance.

You’re right. You and I have been growing apart for quite a while now. I assure you that my “lack of activity” is not because Best Buy sells inferior products or is a terrible company. It’s not you. It’s me. I’ve been a responsible consumer for quite a while now and running up a charge card is simply not high up on my list right now. I guess I’m trying to say that I’m not very attracted with you anymore.

As with any relationship, I do take issue with “activity ultimatums.” As a result, your threat to close my account unless you “get some” before February 20 is pretty offensive.

So this is what I suggest: On the back of this page you will find a picture of me from, I believe you’ll agree, my best angle. Turn the page over and kiss right in the middle where you’ll find my relatively firm posterior. In case you’re wondering, yes, I work out.

So if that means you’re going to close the account on February 20, you do what you need to do. Whatever makes you sleep at night. Oh, and if any of your colleagues would like a copy of the picture so they can also kiss my “you know what” feel free to send me a self-addressed stamped envelope and 25 cents per copy desired. (Oh, I don’t accept credit either, cash or bank check please.)

And thanks again for the coupon. I look forward to using it at one of your competitors that gladly accepts Best Buy coupons.

Sincerely,

Nick

P.s. I know I said it’s not you, it’s me, but it really is you.

That would be fun. At the end of the day, I wouldn’t do this. It would accomplish nothing but make me laugh a little and waste a bunch of time. But I do think it would be pretty funny – especially if they sent me one of those “prepaid” envelopes so they would have to pay for the delivery too….

Just let them close it
In my credit mix, my store cards are a very small part. So if I never used it I would just do nothing and let them close it. Maybe if I “needed” to replace something or buy something tiny and Best Buy had the best deal on it I would use the card once. But that’s a big maybe. Plus what’s to stop them from sending you another letter six months from now? I wouldn’t want to spend a bunch of money just to keep it open. Not in my world.

Buy and return something
If they’re looking for “activity” and a small part of me preferred to “try” and keep it open I would probably try the following and see if that satisfied their request for “activity.” I would go to Best Buy and buy something small. I would then “happy dance” over to customer service and return it immediately. They get their “activity” but I don’t spend a dime.

This is really important: If I did this (1) I would be perfectly fine if it doesn’t work and they just close it and (2) I would make sure I bought something very, very fun or embarrassing to say like the shake weight. I would do this so that if I wanted to push the “you got your activity so why did you close my account” agenda, I would have fun on the call or letters trying to see how many times I could say “shake weight” or get the customer service person to say “shake weight” on the phone.

(If you don’t know what a happy dance looks like watch this video. What I’m talking about starts at 32 seconds in).

At the end of the day, assuming it was a low limit card that I didn’t really use, if I got that letter I would probably buy and return something unless it took me significantly out of my way. Either that or I would just ignore it and let the account disappear. I wouldn’t spend money just to have the card open.

One more option
You could also try calling customer service and just say there’s nothing you want right now but you would like the account open so you could use it in the future. I’d handicap them agreeing to keep it open at 40%. If you’re concerned maybe you try that first.

Other resources
My favorite place to go for credit questions is MyFico.com. They have some god FAQs that usually answer most questions. So check those out.

Will closing a credit card account help my FICO score?

What’s in your FICO® score

I hope this helps. Any other readers have thoughts?

Until next time, put your credit card down and slowly step away from the mall!

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Image: Stuart Miles / FreeDigitalPhotos.net