The reason for cancelling my credit card account: You have been seduced by a beautiful pair of shoes or a fashionable jacket, you have requested your credit card, and at the time of payment a receipt is issued with the message ” Account Closed by Creditor “. You wonder: why my Credit card account was cancelled??
Apparently you are not required to be notified before a credit card issuer or lender closes an inactive account after a certain period of time. This was reported by Equifax credit agency.
This is not something you want to happen to you. Therefore, today we tell you what you need to know about cancelling your credit card account and how to avoid it.
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What causes the bank to cancel a credit card?
The issuer won’t earn any money on an account that doesn’t have a balance due and doesn’t use it regularly to make purchases. This is unless the account has an annual fee.
No fees for foreign transactions, cash advances, late payments, etc., if there is no balance. In other words, the account is not earning any income.
It is irrelevant whether the card is swiped or not; the issuer has already incurred costs to analyse your credit, manage the plastic, issue it, and coordinate its issuance.
So your card will become ” Inactive ” after a period of time, depending on the issuer’s policies.
The issuer may decide to close an inactive credit card account if it remains inactive for a long period of time, usually 6 months to a year. Even if you don’t use your credit card, issuers want to keep that available in case you suddenly need it. In general, issuers can only extend limited credit. This is the reason annual fees and maintenance fees are charged.
A consumer who actually uses that credit may be favoured over one who doesn’t.
It is common for card issuers to cancel cards after one year of inactivity, although there is no standard timeframe for doing so.
In case you’re worried that one of your cards might fall within this range, you might want to ask your issuer about their policies. This includes the downtime required to cancel the account.
Various other reasons
In some cases, issuers close accounts when customers fail to meet the terms of the contract.
If a cardholder misses payments on their entire balance or is repeatedly late on payments, the issuer may decide that the account is too risky and close it.
According to the Consumer Financial Protection Bureau (CFPB), credit card companies have the right to close an account at any time.
A credit card issuer may close an account for any of the following reasons:
- Your credit score drops suddenly.
- You have rejected any change in the terms, conditions, or policies of the issuer.
- There may be credit card products that the issuer does not offer that are right for you.
- There may be a change of ownership at the issuing bank or company.
Credit card account cancellation without notification
If your credit card issuer decides to close your account due to inactivity, they are not required to notify you in advance.
This could be frustrating or annoying, especially if you have rewards or loyalty points on the credit card that disappear when the account is closed.
Inactivity cancellations, on the other hand, do not require advance notice. This is despite the fact that federal law requires 45 days’ notice for any major changes in terms, including changes in rates or minimum payments.
If you do not use your card within a certain time period, your issuer can tell you that your account has been closed, but it is not mandatory. Instead, you may receive a notification that your account has been closed.
Your account may be closed when you attempt to use it in the worst case scenario. The issuer can refuse your request to reopen the account after it has been closed, but you can appeal.
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What are the effects of a closed credit card account?
The advantage of having a credit card account open but with no balance is that you have credit available that you are not using for possible contingencies. It is, however, important not to abruptly close your account.
In that case, not only are you losing your available credit, but your credit record may also be affected.
A credit card account being closed, even if it was infrequently used, can have serious consequences for your credit score.
Your credit utilization ratio can skyrocket as a result, which can negatively impact you.
Credit utilization ratio measures the amount of your available credit you are using at any given time; a lower utilization rate will improve your credit score, since you will be considered a low-risk borrower.
Your percentage of use increases when you have other credit cards that have a negative balance. This reduces the total limit, which can throw your proportion in the wrong direction.
Maintain your credit rating even if your credit card has been cancelled
If you are unsure about your credit utilization ratio, it is advisable to stay below 30% whenever possible. This means that you are not using more than 30% of your total credit limit at any given time, whether on individual cards or in groups. All your credit cards and emissions accounts.
If you want a stellar credit score, you should keep utilization at a low level.
Having an account for a long time also affects your credit score.
Credit card accounts that have been in good standing for years can boost your credit score since they demonstrate strong history.
When all the other accounts on your credit report are recent, deleting an older one can have a more significant impact on your credit score, although if the account was in good standing, meaning you paid all your bills on time, it should remain in good standing. After closing, your credit report will remain on your file for up to ten years.
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What is the most effective way to keep a credit card account open?
You can take the following steps to prevent your credit card account from being closed:
Firstly, if your card issuer closes your account after a certain period of inactivity, contact them. So you will be aware of the timeframe they are working on.
If you have fallen out of use of a card, use it for a small purchase every month and try to pay before it expires.
Install an automatic charge from the subscription service, such as Netflix or your phone bill, to the card to make things easier for you. Your subscription account will then be active and open every month.
In addition, it authorizes the automatic payment of the balances owed, for which you should consult your bank or issuer.
Cancellation of my credit card account – final considerations
When your credit card is cancelled, you can appeal to your credit card company if you wish to keep it.
Your account may be reinstated by some lenders, but there will likely be a formal inquiry that will negatively impact your credit.
It’s a smart idea to check your credit report to ensure the card account is indeed shown as closed if you decide not to request reinstatement of the card.
As an alternative, you can also improve your credit by paying off your card every month and using it responsibly.
The timely payment and longevity of your account are factors that influence your credit score. Therefore, maintaining your account is beneficial even if you only use it occasionally for small purchases.
Keep your credit card accounts open by checking your credit for free.
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