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Yes, credit card companies can close your account without notice. This can be a frustrating experience, especially if you’re not expecting it. But there are a few reasons why this might happen.
Here are some of the most common reasons why a credit card company might close your account without notice:
- You haven’t used your card in a long time. Credit card companies often close accounts that haven’t been used in a while. This is because they want to reduce their exposure to financial risk.
- Your account is in default. If you’ve stopped making payments on your credit card, the card issuer may close your account to prevent you from making any more purchases.
- You’ve consistently exceeded your credit limit. If you’re constantly going over your credit limit, the card issuer may view it as a risk that you’re unable to manage your debts well.
- Your credit score dropped significantly. Credit card companies run routine credit checks on existing account holders to make sure they’re still managing all of their debts well. If your credit score has dropped below the cardholder’s minimum credit score requirement, your account may be closed.
- You’ve breached the terms of the card agreement. Each credit card comes with an agreement, and if you do anything that breaches that agreement, your account may be shut down.
- The card has been discontinued. Credit card companies periodically discontinue certain cards. Depending on the situation, you may be able to continue using your card even if it’s closed to new applications, or you may be offered a different card as a replacement. In some cases, though, the card issuer may simply close the account.
Credit card companies may notify account holders before closing their accounts. But they’re not obliged to, so the cardholder might be completely surprised by the closure. Fortunately, there are actions you can do to prevent the need for closure in the first place.
How to Keep Your Credit Card Account Open
If you want to avoid a situation where your credit card gets closed without notice, here are some actions you can take:
- Call the card issuer and ask when they typically close accounts due to activity.
- Put a small recurring charge on your card to avoid letting it go unused.
- Set up automatic payments to ensure timely payments every month.
- Read and follow the card agreement to avoid any breaches. If you don’t have your agreement handy, call your card issuer and ask for a copy.
- Manage all of your other credit accounts well.
- Avoid using your card if you’re consistently bumping up against its credit limit.
What Happens When Your Credit Card Account is Closed?
Closing an account, even if it was infrequently used, can have a significant negative effect on your credit.
Here are some of the ways an account closure can affect your credit:
- Credit utilization: One of the most important ways an account closure can affect your credit is if it causes your credit utilization rate to spike. Your credit utilization indicates how much of your available credit you’re using at any given time, and a lower utilization is better for your credit score. If a card is canceled, you lose access to that available credit, and your credit utilization rate will increase if you have balances on other credit cards.
- Positive payment history: If you’ve had a credit card account in good standing on your credit report for several years, the account’s positive history can help improve your score. If that account gets closed while it was in good standing, it’ll stay on your credit reports for up to 10 years, but it won’t carry as much weight as an open account would. Furthermore, closure of the account means no additional on-time payments will be added to the account, which can hamper your progress improving your credit score—especially if it’s one of only a few accounts you have in your name. If there were negative items on the account, such as late payments, those will remain on your report for seven years.
- Length of credit history: The longevity of your accounts also factors into your credit score. Credit scoring models look at the age of your newest account, as well as the average age of your accounts. If all of your other accounts on your credit report are newer, the dropping off of a much older one can ding your score. If you have to open a new account to replace the closed account, this can have an added effect.
- Credit mix: If you only have one credit card, losing it could impact your credit mix. This score factor considers how many different types of credit you have—installment loans and credit cards, for instance. If you have multiple credit cards, though, having one closed may not have much of an impact on this credit score factor.
What to Do If Your Credit Card Account is Closed
You have a few options if your credit card account has been closed:
- Contact the card issuer and ask why your account was closed. They may be able to give you more information about the reason for the closure and whether there’s anything you can do to get it reopened.
- Review your credit report to make sure there are no errors. If there are, you can dispute them with the credit bureaus.
- Open a new credit card account. This can help you rebuild your credit history and improve your credit score. However, be sure to choose a card that you can afford to use responsibly.
- Monitor your credit score regularly. This will help you track your progress and make sure that your credit is in good shape.
For a number of reasons, credit card companies have the right to immediately terminate your account. However, there are steps you can take to avoid this from happening. There are additional actions you can take to lessen the impact on your credit score in the event that your account is closed.
Frequently Asked Questions
Can I get my credit card account reopened?
It’s possible to get your credit card account reopened, but it’s not guaranteed. If your account was closed due to inactivity, you may be able to get it reopened by simply calling the card issuer and asking them to do so. However, if your account was closed due to a violation of the card agreement, it’s unlikely that it will be reopened.
How long does it take for a closed credit card account to fall off my credit report?
A closed credit card account will stay on your credit report for up to 10 years. However, the impact of the closure on your credit score will diminish over time.
Will closing a credit card account hurt my credit score?
Yes, closing a credit card account can hurt your credit score. This is because it reduces your available credit and can increase your credit utilization rate. However, the impact of closing an account will vary depending on your individual credit situation.
Should I close a credit card account that I’m not using?
If you’re not using a credit card account, it’s generally a good idea to close it. This will help to reduce the temptation to use it and rack up debt. However, if the account has a long history of on-time payments, it may be beneficial to keep it open to help improve your credit score.
Additional Resources
Banks don’t need to notify about credit card account closings
Your card issuer is required by the Truth in Lending Act to notify you when the terms of your card account change significantly in certain ways. For example, it has to give you notice at least 45 days in advance before increasing any fees or the interest rate on your card.
That being said, your issuer need not inform you that your interest rate will increase if your variable interest rate is linked to an index, like the prime rate, and the index rises. Additionally, the issuer is not required to notify you in advance of the end of your promotional interest period (although the terms of the promotional offer should have made you aware of this information).
Issuers also don’t have to notify you in advance if they decide to close your credit card account.
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- If you stop using your credit card for an extended period of time or break the terms of your agreement, credit card issuers have the right to close your account.
- If this occurs to you and you would like to maintain the account open, get in touch with your issuer to see what they can do.
- The kind of rewards the card earns determines whether you can keep your rewards or not (for example, standard points versus miles earned with a co-branded airline card)
Credit card holders look to their cards as a convenient and ready source of financing. It may surprise you to hear that a credit card company has the right to cancel your account without giving you notice for a number of reasons.
What should you do in this situation? And what happens to any rewards you had on the card?