Can a Company Close My Credit Card Without Notice?
Imagine getting ready to pay for items in a store only to find out your credit card is being declined because the card issuer closed your account. Sound like a nightmare? Unfortunately, your credit card company can legally close your account at any time.
Why would a card issuer close your account? The most likely scenario is when you have missed a number of payments, gone over your credit limit, or filed bankruptcy. Unless you file for bankruptcy (at which point you will be protected by law), your card issuer will likely sell your debt to a collection agency if you still owe money after the account has been closed. This will negatively impact your credit and will stay on your record for seven years, so it should be avoided at all costs. If you are having difficulty making your minimum payments each month, contact your card issuer before you fall behind. If you notify them of an issue before you have missed a payment, they may be able to waive fees, lower your interest rate, or allow you to miss a few payments without penalty. You want to avoid missing payments if at all possible, though, as you will continue to accrue interest.
However, even if you are paying all of your bills on time and are not near your credit limit, the card issuer can still close your account. If you have stopped using the card, they may cancel your account because they are not making enough money on your account. Credit card companies make money, in part, by charging retailers a swipe fee. Thus, if you are no longer contributing to their bottom line, they may just close the account. This is an easy issue to avoid. Simply make sure you are periodically using your card and pay off the balance in full each month.
Your credit card company may also close your account if they notice something amiss on your credit report. Card issuers are constantly monitoring your credit, and if something in your history makes them think you have become a riskier borrower, they may close your account. Lending people money on a credit card poses a risk to the issuer because the money you owe is unsecured—they cannot repossess an automobile or a house as they can with a secured car or home loan. So issuers may be trying to minimize their risk. Behaviors that show you may be a credit risk include maxing out other cards or opening a number of accounts in a short period of time.
It is important to know that a card company does not need to warn you if they plan to close your account. While the 2009 CARD Act requires credit card issuers to provide written notice 45 days in advance of a significant interest rate hike, no such notice is required if they are going to close your account. Card companies can close your account without any notice if you default, stop using the card, or are delinquent in payments. If they close your account for any other reason, they simply must notify you within 30 days after they close the account.
How can you make sure your account will stay open? Make payments on time and use your card periodically. Additionally, make sure you are keeping all of your accounts in good standing and are not maxing out your cards. To maintain excellent credit, you should be using no more than 30% of your available credit.