I just phoned Sainsbury's bank to cancel a credit card that I got 2 years ago and haven't used for over a year.

The guy was trying desperately to stop me closing the account. I explained that I got it to make a large purchase on interest free and that I have had no need for it for the past year.

He came back with "well with the credit crunch, if you cancel this card now you might not be able to get another one." and "if you cancel it you will probably get a much worse credit limit and APR if you apply for a new one in the future."

Si

If they really said that, I would report them to the FSA.

Not just sainbury's. Me missus has spent years spreading our mortgage over loads of 0% cards and paying the min payment with other 0% cards - saved us 000s a year. As those deals are long dead, I have been systematically 'cleaning' up ( i.e. closing ) unused accounts and have had the same thing said to me more than once (Egg being one of them). One chap was adamant I should not close the account screaming - "where would you be if you suddenly needed money?" - I replied "on the board of a British bank I guess" - he was not ammused.

Si

Interesting, why would banks fight to keep dormant credit card accounts open? Can only assume some crude incentive scheme is in operation that motivates junior employees to dissuade a % of callers to change their mind regardless of the account's usage.

When card companies get bought out they liked to be able to show they have X number card holders to drive up their sale price. That was the way it worked in the 1990s. Probably different today - many will go to the wall I guess.

there is a secondary market for unsecured debt, much like the MBSs for mortgages.

Hmmm... I've got 3 credit cards. No balance on any of them so I'm probably going to do the same myself.

Probably worth keeping one though.

I've got one with Morgan Stanley that I pay off after I use it, but I get 1% cashback. Expecting to get binned soon 'cos they basically are paying me to use their card (Its a Mastercard)

You should be fine, because they get more than 1% as a fee from the retailer each time you use it. E.g. US rates around 2%

Good point. I'd fogotten for a moment the charge to retailers. In some shops in Europe, the retailer charges this to the card user.
Friend of mine got charged 3% to use a Visa Credit Card in a 'Tabacos' on holiday! This may also be a bit of a deliberate deterrent because of the amount of card fraud, very little chip and pin abroad dontcha know.