The Frugal Creditnista

What Happens When A Store Card Switches Credit Card Companies?

What to Do When A Store Card Switches Credit Card Companies

Recently, Walmart parted ways with Synchrony Bank, the long-time issuer of its store-branded credit cards. This happens with store credit cards ever few years, and each time current cardholders report a decrease in their credit scores. 

Many are asking “Will the new credit card issuer continue to negatively affect my credit?”

With some of our readers experiencing a credit score drop of up to 10 points, and the only difference on their credit reports being the switch from one Credit Card Issuer to another, this is an understandable concern.  One reader noted that their Walmart Synchrony Bank card is being reported on Transunion as a closed account — even though they had no control over its fate. 

Here’s what you can expect when your store credit card switches issuers and how you can mitigate its impact on your credit score. 

What Happens When You Close a Credit Account?

In some cases, closing a credit card account can be detrimental to your credit strategy. The exact impact it will have depends on several factors, including the value of the credit line, if there is a balance reporting on the closed credit card, as well as the balances and limits on your current, open credit cards.

There are four main reasons why many would want to voluntarily close a credit card account:

  • You struggle to control your spending and need to remove that credit card as an option
  • You’re paying an annual fee on a credit card you don’t use
  • The card was obtained while you were building credit, your scores have increased and you now desire better credit cards in your wallet.
  • You’ve got excited, opened way too many and now need to close some to better manage the select few who made the cut.

Other than that, if you have a good quality card, it’s best to just leave it open, even if you don’t plan on using it often.

In general, closing a credit card can harm your score if you had a high balance on other credit cards when the credit card was closed AND the credit card that was closed had a high credit limit. This is because creditors look at your overall credit utilization ratio. If you had no credit utilization on one card, it helped to offset the other cards. But getting rid of that zero-balance card leads to spike in total credit utilization, which can impact your score.

When credit card companies switch credit issuers, such as with Walmart, Synchrony Bank, and Capital One, cardholders had no say in whether their old accounts were marked as closed or not.

Understanding the Two Tradelines on Your Credit Report

If you are affected by Walmart’s switch to Capital One, you will notice a visible change on your credit report. Instead of seeing just one line item for your Walmart credit card, you’ll now see two tradelines: one for Synchrony and one for Capital One. Tradelines are the credit accounts on your report that are sent to major credit bureaus. This will happen whenever any store credit card changes its issuer. 

The card attached to the former credit card issuer will be marked as closed, which is one of the reasons why the switch is sounding the alarm for cardholders.  If you compare the two tradelines, you’ll notice that they will both have the same Open date. For example, using the Walmart, Synchrony Bank, and Capital One example, if you applied for your Walmart Synchrony Bank credit card in March 2016, then your new Capital One tradeline will also bear a date of March 2016.

Capital One confirmed that the new tradeline will contain the same information from your previous one, including when the account was opened. Your average age of accounts is also unlikely to change. This is because a credit card issuer change is considered a takeover, not a transfer.  The new issuer will simply takeover the account and will report the same open date, balance, payment history, etc.  It’s considered a continuance of the account.

This is good news for cardholders who fear losing their credit card’s history due to the transition, as the length of credit history is one of the core factors that affect your credit score.

Now, let’s talk about the score drops.  Credit reporting does not happen on the same day.  Using our example, Synchrony Bank can report the closure right away and Capital One can  report the new account the following month.  The gap in reporting time can trigger a ‘account closure’ alert with your current credit monitoring service, which can cause a temporary score drop. As soon as the new credit card issuer reports, it will all even out in about 60 days or so (as long as all else remains the same).

No Application Means No Hard Inquiry

Here’s the best news, even though you’ll receive a new card and a new account number, your card won’t be treated like a new account. You didn’t have to reapply with Capital One to receive your new Walmart credit card, which means there was no hard inquiry into your credit history. 

This is especially beneficial for those who are seeking (or will seek in the future) a loan and want to avoid any dings in their credit score. In this case, you didn’t actively seek to make changes to your credit status, so there’s no reason why you should experience any negative long-term effects.

Next Steps for Concerned Credit Card Holders 

If you’re concerned about what a closed account means for your credit score, you’re not alone — and your credit card company is prepared to help. Your best move is to call the institution that you have your card with for clarity. 

Taking a proactive stance with your credit is the best way to maintain control. 

Need Help Soaring Your Credit Scores?  We’d love to help! 

Complete our Free Prequalification Application Here!

Sharing Is Caring!

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts: