During the Great Recession and the years following, the Federal Deposit Insurance Corporation (FDIC) closed 465 failed banks. But even in the last few years, at least five to ten banks close per year. If you have a credit card from one of these banks, what happens when your credit card company shuts down?
Why banks and credit card companies close
Like all businesses, banks and credit card companies have to make money to keep operating. Even small card issuers require staff, offices, and computer systems to keep things up and running. But when the profits don’t add up, they can’t keep the lights turned on.
The Great Recession of 2007 and 2008 led to the closures of a massive number of banks and impacted a huge number of Americans. I saw one bank where I had a CD account go under, and got a check from the FDIC for my funds. But that is what happens for checking, savings, and other bank accounts, not credit cards.
In the Great Recession, the source of banking losses ultimately boiled down to poor real estate lending practices and poor risk management for large investments in pools of mortgages. The United States averages 5 to 8 bank closures per year since that time, but that figure does not include nonbank lenders, which may include credit card issuers.
When a bank or other financial company does shut down, it may not bring all accounts with it, however. There is a good chance the accounts will live on at a new bank or financial institution. That is why it is very important to watch your email and snail mail for any notices or information regarding your account at a closed credit card issuer.
What happens to your accounts when your credit card company closes