What happens to a store credit card when the store closes? – Forbes Advisor

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It’s one thing to lose access to your favorite store and it’s quite another when the business is completely blocked. With no physical locations and online presence, you obviously won’t be shopping with them anymore. But what about your store’s credit card?

Here’s what happens when you have a store credit card but the store goes bankrupt.

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What happens to your store credit card?

Your account may be closed

While some store credit cards are truly “closed loop” and can only be used at a single store (or family of stores), others may be offered by major issuers like American Express or Visa.

If a retailer only closes some of its stores but keeps others open (or maintains an online presence), it’s possible that nothing will change with your store card.

However, if the store the card is associated with goes bankrupt, that’s a different story. In this case, your account will likely be closed, which makes sense since the card can only be used at that specific retailer anyway. You will receive a notice from the store or card issuer telling you when the closure is final, which may give you time to plan.

Account closure may not matter to you if you don’t have revolving debt, but you may see an impact on your credit score if you do. This is because your credit usage will increase due to the card being closed and you no longer having available credit on that account.

For example, suppose you have several credit cards with an aggregate total limit of $10,000 and your store card has a limit of $2,000. If your store card closes, then your total available credit drops to $8,000. If you have revolving debt on other cards, your credit usage will suddenly increase. Ideally, you’ll keep your credit utilization below 30%, so you should aim to pay off debt below that amount if you can.

If your card is open loop, it may be worth contacting the issuing bank to see if they will move your available credit to another card in their wallet. This will help you lower your credit utilization rate.

Your rewards will disappear

If you earned rewards associated with a store when you redeemed your store card, those rewards will go well with the store itself. For this reason, if you receive a notice or anticipate an impending closure, you should try to spend all rewards while the store is still open.

For example, JC Penney has a store card, the JCPenney Credit Card* and its own rewards program, but this retail giant filed for bankruptcy protection on May 15, 2020. As of this writing, JC Penney stores are still open and the company‘s website company is fully operational. However, if you are worried that your card store will cease to exist soon, you should go to a local store or visit the website to spend all the rewards you currently have.

Your credit card balance won’t disappear

Unfortunately, closing a store does not allow you to repay your debt. You will continue to receive account statements from the card issuer and you will be required to repay any amounts you owe on your card.

Since store cards tend to have high APRs, you should aim to pay off closed store card balances as quickly as possible. If you need time but are tired of paying exorbitant interest, you should also look to 0% APR credit cards that allow you to transfer a balance to avoid interest for several months while you pay more.

Our advice for closing your private card

When your store card closes, we suggest you pay off your balance and upgrade to a new card with better benefits.

Your card issuer knows that you might want to switch to a new card and will probably offer you another card. However, you don’t have to accept their offer to apply for a new card. There may be alternative cards with other issuers that better suit your purchasing preferences, or you may not need a replacement card at all.

If you decide to request a replacement card, you should take the time to explore all of your options. While store cards may offer in-store discounts and are often easier to obtain, traditional credit cards tend to offer more purchase protections and cardholder benefits. Even better, the rewards you earn with a traditional cashback credit card or rewards card can usually be redeemed in a variety of ways, not just at one store.

Our credit card guides can help you find a new credit card with better benefits, so be sure to browse all the best card offers to find the one that best suits your goals.

What happens to gift card balances when a store closes?

Now, let’s address another important question: where does the gift card balance go when a store closes? Often you will not receive a refund. However, there are steps you can take if you have a gift card balance with a retailer that no longer exists.

According to Consumers Federation of America, you should start by trying to contact the company to see if they will voluntarily refund you. This may be easier to do if you had a gift card for a small local business versus a giant national business. You can contact the town hall where the company is located to obtain its contact details.

If that doesn’t work, you can also check if you paid for the gift card with a credit card. If you did, the Consumer Federation of America says you can file a chargeback on your credit card and potentially get a refund that way.

Next, they recommend contacting a government agency that offers consumer protections in your state. You may or may not be able to get your money back this way, but it won’t hurt.

Finally, you can file proof of your claim in the US Bankruptcy Court. When you complete this step, you will be added to a list of creditors to whom the business owes money. This does not mean that you will get a refund of your gift card amount, but you will be in line for a refund if the money becomes available.

Could your landlord’s insurance policy come into play?

Interestingly, you may also be able to file an insurance claim on your gift cards if the store associated with them closes. For example, Erie Insurance took inspiration from Covid-19 related store closures and added something called “Local Gift Card and Gift Certificate Reimbursement Coverage” as part of their ErieSecure Home® policies.

This coverage is a useful umbrella, but very limited and uncommon to most home insurance policies. So if you end up with a gift card you can’t use after a business goes bankrupt, it’s worth checking with your insurer to see what’s covered, but don’t be surprised if you don’t. have no luck.

When it comes to gift cards, it’s best to use them as soon as possible to protect yourself against loss or theft as well as store closures.


Store cards are attractive for their discounts, especially at the retailers you frequent, but compared to traditional credit cards, they are more likely to be dropped. If you already have a store card or two, you don’t necessarily need to close them, you can keep them and enjoy their benefits, but don’t accumulate your rewards, just in case.

Unfortunately, there is not much you can do if the underlying store closes and your account is closed. The best course of action is to simply move on and find a more stable card for any future purchases – and think twice about jumping into other store cards the next time you’re at checkout. .

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