Why did my credit card company close my account?

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Your credit card company may close your account without your permission. Here are a few reasons why they might.

When you took the trouble to find the right credit card, it’s frustrating if your card issuer closes your account. Not only that, but closing card accounts can hurt your credit rating and Deprive yourself of a line of credit you need.

Unfortunately, credit card issuers are free to close your account. While this doesn’t happen often, there are certain behaviors that make unintentional account closure more likely.

Why would a credit card company close an account? The reasons include:

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  • inactivity,
  • excessive spending,
  • violation of your cardholder agreement,
  • a drop in your credit rating,
  • worry about your continued ability to pay your debts,
  • add too many authorized users,
  • the card being interrupted, and
  • costs too much to the card issuer.

Inactivity

If you don’t use your card often, your card issuer may dramatically reduce your credit limit or close your account altogether. Different card issuers have different policies on when to close a card for inactivity. They don’t have to tell you in advance, so use your card every two months to make sure that doesn’t happen.

Excessive spending

Many card companies track your spending and look for trends that suggest you may be in trouble. If you are maxing out your credit cards and not paying off the balance, your credit issuer may get nervous and decide they don’t want to keep you as a customer. If this happens, they can close your account. Of course, you still have to pay any outstanding balance even if you can’t make new charges.

Breach of Your Cardholder Agreement

When you get a credit card, you agree to a whole host of terms and conditions. If you do not comply with these conditions, your card issuer may close your account. This could mean, for example, that your account is closed for exceeding your credit limit, late payment or violation of rules set by the card issuer.

A drop in your credit rating

If your credit score drops significantly, you may no longer qualify to remain a cardholder. Credit card issuers may worry about why your score is dropping and decide to close the account rather than take your chances by allowing you to charge a fee that you cannot reimburse.

Worry about your continued ability to pay your debts

Default is costly for card issuers. Credit card companies want to avoid this if possible – and they know the signs that someone may become unable to repay what they owe. If you default on credit cards from other card companies, for example, your current card issuer may decide that you are now a high-risk borrower who they no longer want as a customer.

Card companies would dramatically increase your interest rate if you missed payments, even with other card issuers. This was called a universal default penalty. Consumer protection laws have banned this practice. Card issuers cannot increase your interest rate once they are concerned about your ability to pay. But they can decide to close your account instead.

Add too many authorized users

Many cards allow you to add authorized users, which means that you authorize someone else to use your account. Some cards have limits on the number of authorized users you can add, or they may charge a fee per user. Others are more flexible.

However, your card issuer may be concerned about the number of authorized users you add. Or if you continue to add and remove authorized users. This raises red flags and your account could be closed.

The card is interrupted

Sometimes you will lose access to a credit card through no fault of your own. This is simply because the card will no longer exist in the future. Often times, if your card is abandoned, the card issuer will offer you the option of switching to a similar card. Before you decide to do this, see if you will keep your credit history and find out if the new card has similar rates and terms. Don’t switch to the new card unless it makes sense to you.

Costing the card issuer too much

A lot of people like to play with the system when it comes to credit cards. They manipulate rewards programs and bonuses to try and earn tons of credit card rewards. Card issuers often dislike these types of cardholders because they cost the issuer money. If you become an unprofitable customer, your card company may kick you in and let you know they don’t want your business anymore.

Why did my credit card company close my account?

Card issuers often won’t notify you before closing your credit account. However, you can contact your credit card issuer to request an explanation. You can also try to appeal the account closure and have it reopened. However, since card issuers have a wide discretion to close accounts, there isn’t much you can do if your card company decides they don’t want you as a customer anymore.

Your best bet is to try to avoid behaviors that could lead to an involuntary account closure. Use your cards regularly, avoid by maximizing them, don’t do anything that hurts you credit rating, and carefully follow your cardholder agreement. If you do these things, you shouldn’t have to worry about why your card issuer closed an account you wanted to keep.

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About Cecil Cobb

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