Did you know your credit card company can drop you for any reason? I didn’t either until I got the letter yesterday.
“We regret to inform you we have closed your credit card account,” the letter read.
I paused to deal with the shock.
“What?” I thought. “This can’t be happening to me. Not now. Not like this. There’s still so much I was hoping to do together.”
I read on.
“Our decision was based on your account having been inactive for 12 months. We will notify the credit bureaus within 60 days to advise that this account has been closed. We have appreciated the opportunity to serve your credit needs,” it continued.
“Well,” I thought, “that’s it then.”
Dumped by my credit card.
I’ve been on the receiving end of some harsh break-ups before, but this one hurt. No warnings. It just came out of the blue.
And they did it by mail? Cold.
Like others who have been scorned before, I couldn’t figure it out.
I had been faithful – no suspicious activity on my part. I was never late – I made all my payments on time. I never expected too much. I always stayed under my credit limit.
And now, kicked to the curb, and with such language!
“Inactivity?” Okay, well, I may not have always been the most physical, but “inactive” was going too far. “Notifying the credit bureau?” Well, that’s doesn’t seem necessary. And, “appreciated the opportunity to serve my needs?” Ouch.
There was only one thing to do. I needed some advice from a close friend. I consulted Google.
What I found didn’t help. It turns out I’m not the only one who has suffered at the hands of a fickle credit partner.
Ever hear the break-up line, “It’s not you, it’s me?” Well, in the case of your credit card, it’s true.
Seems it doesn’t matter how good you are to your credit provider. If they want to dump you, they will, because they can.
However, closing a credit card account for “no reason at all” is a bit of an overstatement. There is one reason: because you’re not profitable.
From the company’s perspective, if you’re not using the card, it makes more sense to offer that credit to someone else that will – and rack up lots of interest along the way.
Although the Credit CARD act of 2009 helped to increase protection against interest rate hikes and over-limit fees, credit cancellation policies remain largely unchanged.
Even if you’re not in default, your credit issuer can ditch you any time. The most common reason? You’re not using the account often enough.
“Sometimes we close accounts based not on your actions or inactions, but on our business needs,” my credit card agreement reads.
One consumer tried to battle a cancellation but to no avail.
After his card was cancelled, Paul Dieffenbach Jr. tried to sue Citizens Bank, but lost. Judges upheld the bank’s right to cancel his card despite the fact he had never missed a payment and never asked for an increase to his line of credit.
So, do card issuers have to warn you before they cut off your credit? Nope.
According to the CARD Act, creditors need to provide written notice to consumers 45 days before an interest rate increase or a “significant change” to the account’s terms.
Cancelling your card doesn’t qualify.
And how about your credit score? The news isn’t good there, either. Thirty percent of your FICO score comes from your “credit utilization ratio.” In other words, how much credit you’re using compared to how much you have available.
When your card gets canceled, you lose a big chunk of your available credit, resulting in a sudden increase in your utilization, if you carry balances on other cards. What does that mean? Your credit score will drop.
If you find yourself in that position, the best thing you can do is to pay down your existing debt or apply for a new card, which will again reduce your overall utilization.
In the end, no matter how responsible you may be, there are no guarantees you won’t receive a break-up letter like mine.
But at least you can try to learn from my mistake. If you’re looking for an equitable relationship, don’t count on your credit card company.
They’re very high-maintenance partners. If they’re not seeing you all the time, they lose interest.
Should a credit card be able to cancel your account for any reason?