How to Avoid Getting Your Credit Card Canceled
Some people like to have their credit card available for emergencies — either at home or while traveling abroad. Be careful: that card might not be available to you, just when you need it the most. This article explores the various reasons why your credit card could be canceled on you, along with some tips to help avoid having your own credit card canceled — possibly without notice.
I speak from experience: while traveling in Australia, I found out — the hard way, in the throes of an emergency — that my credit card had been canceled without notice, months prior.
I’m still here to tell the story though, so my emergency was not life-threatening. But I can’t possibly express the various shades of red I saw when I found out what had happened, and spent countless hours and days on overseas phone calls trying — unsuccessfully — to reinstate the card and rectify the situation.
True Horror Stories
A woman is vacationing in Europe when she discovers that her reward miles credit card is on the fritz. She is stranded and spends hundreds of dollars in cell phone calls to the credit card company and the banks, trying to get out of this bind. There is no retribution granted from the credit card company who had canceled her card outright. To make matters worse, she loses out on the free companion ticket she had just earned with her rewards.
How about the person who finds that the gas pump won’t take their card? Nothing is amiss: they are in their home town, use their card regularly and responsibly, and maintain an excellent credit score too. But their credit card is also canceled, without notice. The reason cited? “Something” on their credit report was amiss. However with a spotless credit record, the real suspected reason is that their account wasn’t profitable enough for the credit card company to keep them on board.
What Gives? Reasons Credit Card Companies Will Cancel Cards
With the ability to change the terms and conditions at any time, credit card companies can cut loose card holders who aren’t making them money, especially the ones who pose additional risk or are a financial drain to the company. And when times get tough financially, credit card companies tighten their belts along with everybody else. Here are some specific reasons why the credit card company could cancel your credit card.
This is the most prevalent of reasons why your card will be canceled, and also the most avoidable. Charge something to the card every few months (even something very small), pay it off right away, and you can largely avoid this pitfall.
Don’t settle for a phone call to the credit card company. I had a special note put in my file that I was abroad and would only use the card rarely, in an emergency. The customer service rep I spoke to said that would not be a problem. Two months later, the card was canceled. My suspicion was that my card got canceled by an automated system and not a human being, so the preemptive phone calls and special notes in the file were worthless.
Your Credit Score Dropped
If your credit score has taken a hit, your credit card account could be flagged. (See also: How to Rebuild Your Credit in 8 Simple Steps)
Your Debt Increased
If you just took on a large amount of debt such that your credit utilization ratio is teetering, the credit card company can make sure you don’t get in over your head — by canceling your card and eliminating the chance. (Ironically, this further increases your credit utilization ratio.)
Your Credit Increased
If you just applied for a line of credit or other credit vehicle that increases the overall credit available to you beyond a threshold that the credit company is comfortable with (regardless of whether you actually use that credit), they’ll take themselves out of your equation.
Anything from house values dropping, to unemployment rising can affect your ability to hang on to that credit card.
Credit card companies like to keep their game faces on, and won’t always reveal the true reason why they are canceling your credit card. That’s probably how our friend above had their card canceled due to “something” on the credit report, despite their spotless credit record. Ultimately, it boils down to their bottom line. Hey — that’s business. Let's face it: owning a credit card is a privilege, not a right.
Credit card companies are required to give you 45 days notice for making significant material changes to the terms — such as a change in interest rates.
However, canceling cards isn’t actually considered a significant material change, and cancellation without notice is still allowed.
How It Affects Your Credit Score
More than an inconvenience, the cancellation of your credit card can negatively impact your credit score in a few ways.
Increase in Credit Utilization Ratio
If your credit card is canceled and you are carrying debt elsewhere, then that debt becomes a larger percentage of the overall credit available to you, thus increasing your credit utilization ratio. This decreases your credit score.
Decrease in Credit Longevity
Longevity of your credit vehicles is important; 15% of your credit score is attributed to longevity. If you have a credit card that is 10 years old and others that are only a few years old, the cancelation of your 10 year old card will have a more detrimental effect on your credit score than the cancelation of one of the newer ones.
How to Prevent Cancelation
Once your credit card is canceled, talking your way into having it re-activated requires a minor miracle. So knowing what we’re up against, here are a few preventative measures you can take to increase the chances that you aren’t stranded at the gas pump (or in a distant land), idle plastic in hand.
Use it or Lose it
Avoid cancelation due to inactivity by using the card every couple of months. The size of the purchase is irrelevant, and you can pay it off immediately too.
Pay Attention to Ratios
Maintaining a credit utilization ratio below 25% will keep your credit score high.
Focus on Longevity
If you have multiple credit cards, pay special attention to the ones you have had for a long time. Losing them will be the most detrimental to your credit score.
Please note that you can do everything right and still end up a victim of credit card cancelation. But hopefully these preventative measures will keep you out of the spotlight and off the top of their cancelation list.
What to Do if Your Credit Card Is Canceled
If the deed has already been done and you’re looking for retribution, here are a few things you can do.
Check Your Credit Report
Order a copy of your credit report from one of the big three credit bureaus (Equifax, TransUnion, and Experian). You are entitled to one free report from each of the bureaus every year. You can also use a free service like Credit Karma. Make sure there aren’t any incorrect postings in there that have affected your credit score through no fault of your own.
Nothing is lost (save for some time and possibly a chunk of your patience) by trying to call the credit card company. Who knows — they might take a look at your account and decide you’re worth keeping after all. You never know what you can get unless you ask. (A word of advice: be polite and friendly, and ask for the manager if you aren’t getting anywhere).
I’ve typically used one credit card for all my expenses, keeping a second card in reserve for emergencies or when my regular card isn’t accepted. (When living abroad, credit cards aren’t infallible to dodgy local systems or tricky time zone glitches.)
But just because I’ve fallen victim to having a card canceled without notice (leaving me in the lurch no less), I’m not going to eschew the conveniences and benefits of credit cards that I’ve become accustomed to. To do so would be to shoot my own foot based on principle and anger, and I’m not into self-mutilation. Instead, I’ll make sure to use my backup card regularly and continue to pay the balance off each month. I’ll pay closer attention to the rules and fees, and be sure to stay on the same game page as the credit card companies from now on.
For more articles about credit cards, please see our Ultimate Credit Card Guide.
Have any of you experienced a canceled card without notice? Were you able to get it reinstated?