Marc Serafino
You have probably heard that someone got his/her credit card cancelled? Or perhaps that has happened to you?
It’s a horrible experience… I know, I was there once. And at that time, I had only one card — and it was not working. I had to borrow money from a friend. So yes, I was lucky that I wasn’t alone on a trip. Did I mention I was on a vacation?
Fast forward to today and I’m much more frugal about my credit card use. I know how credit companies work and why something could go wrong. Though there are still some situations I don’t understand completely.
Nonetheless, there are few reasons why your credit card could be cancelled, as well as some things you could do to prevent that from happening. And that’s the point of this article; read on for all the details…
5 Reasons Why Credit Card Companies Could Cancel Your Card
Of all the reasons why a credit card company could cancel your credit card, here are what we believe are 5 most common ones:
1. Non-Use
Non-use is by far the most prevalent reason why some card card has been canceled. This is also an easily preventable reason as it requires users only to swipe their cards for, say, a few times per month. You don’t even need to carry any balance, just to use the (damn) card. That’s why you got it in the first place, right?
2. Credit Score Drop
If you use some fancy credit card that requires an excellent credit score, your bank may decide to cancel it when your score drops. After all, you are no longer qualifying for that particular card.
3. Increase in Debt
The bank will credit you to a certain extent. But if you suddenly start spending like there’s no tomorrow and paying bear minimums every month, it may decide to put a stop on that habit for you. Simply, the bank won’t let you take more credit with that card.
4. Market Conditions Have Changed
These are the factors you can do little about. Things like the rise in unemployment or a sudden drop in house values in your area may prompt the credit card issuer to stop giving you credit. In other words, it could cancel your credit card until market conditions change for the better.
5. Something Else
Even though you are their customer, credit card companies are not obliged to provide you with an explanation for taking some action. You may get some vague reason, but the truth is — it could be a lot more happening you may not be aware of. Perhaps they’ve found something strange in your credit report or credit history, or perhaps they’ve decided to pull the plug on some customers. You may never find out the real reason why they’ve cancelled your credit card.
Now, we hope your credit card won’t be canceled, as it may have negative consequences on your credit score. So in order to prevent this from happening you should stick to the following rules…
4 Things You Can Do To Prevent Credit Card Cancellation
Really, this is all common sense advice though that doesn’t mean it’s always a common practice…
1. Use It
Use the credit card from time to time and you may prevent the cancellation. You may have got it for the generous sign-up bonus, and that’s ok. The important thing is to remember to swipe it — or use it online — a few times per month. Or at least, once a month.
2. Keep Your Credit Utilization Under Control
Credit utilization shows your credit card debt related to the total debt you can have on a card. So if you owe $2,500 and your credit limit is set at $10,000, your credit utilization ratio is 25%. Which is where you and the bank want it to be — up to 25%.
3. Cards You’ve Used for the Longest Are Most Important
The worst thing that could happen is that the credit card you’ve been using using for the longest time has been canceled. This will have the most detrimental effect to your credit score. So if you want to dump some credit card, go to your bank and ask them how to do it in a way that will not have a negative effect on your credit score.
4. Know Your Credit Score
Perhaps we should’ve put this first on the list — you should be checking your credit score from time to time. There are free services like Credit Karma that can help you do that, and if you want all the details — you can always subscribe to the major bureaus’ services (Equifax, TransUnion and Experian). We’re not really advising this expense — cause it’s not free — except if you notice some errors in your credit report and want to fix them.
Despite being frugal and acting responsibly, something could always go wrong. We hope it won’t, but just in case that happens — it is a good practice to have multiple credit cards, anyway. As long as you know how to control yourself, two or more cards could work to your advantage. And if some card gets cancelled, well — you always have another one to swipe. 😉
