Have you ever gone out to dinner with your best friends and when the time came to pay the bill, your card had been declined? Have you ever gone grocery shopping and when you got to the front of the line your card had been declined? Soon after were you informed by your credit card company that your credit card account had been closed unexpectedly? Either of these situations could cause a lot of distress. Many people experience the unexpected closing of their credit card account due to various reasons. In this article, I will explain how a creditor can unexpectedly close your account without your consent. The closing of your account can leave you in sticky situations so it’s best to know how to prevent the situation from occurring.
Unexpected Credit Card Account Closure
The unexpected closure of a credit card account by the creditor can happen for various reasons. Credit card account shut downs can happen for the credit cardholder’s irresponsibility. If the card user is not paying the bill on time, is exceeding the credit limit, or is defaulting on the account, the credit card company will typically close the account. Other card users experience account closures for not using their credit card frequently enough. If you are not spending frequently, credit card companies are allowed to close your account without warning. This is legally allowed because companies feel that if a user is given any notice about their account closure beforehand, he or she would have the possibility to rack up the charges just before the account closure. Since credit card companies are businesses working to make a profit, they often close unused accounts to save on account operating expenses. Unused accounts are costing them money but are not allowing them to make money.
How To Avoid A Credit Card Being Cancelled
To avoid being in an embarrassing and sticky payment situation, it is best to know the steps to avoiding an unexpected credit card cancellation. Different credit card companies have different requirements and spending standards that they abide by. Because credit card companies are all unique, there is no direct way to avoid an unexpected account closure, but I can provide general suggestions.
- Be A Good Patron: The most obvious way to prevent your account from being closed unexpectedly by the creditor is to be a good customer. Pay your bills on time and every month. Also do not exceed your credit card limit and do not spend money that you cannot afford to pay back.
- Use Your Card: The second most obvious way to prevent your account from being closed is to use your card. Making regular purchases keeps your credit account active and the credit card company pleased. If the credit card company is making money from your spending, they will not close your account.
- Keep Your Account Active: Whether you use your credit card as often as recommended or not, you can still keep your account active, even with little spending. If you are spending frequently and paying responsibly, your account will automatically be active. It is recommended that if you do not plan on using your credit card often, make one purchase on the card and pay it off slowly. Doing so will keep your account’s activity level high, while keeping your credit card bill and actual spending low.
- Consider Closing The Account Yourself: If for any reason that you have a card and you have decided that you do not like having it for various reasons, close the account yourself. You can always find a more suitable credit card and cancel the old one. Often people close their own credit card accounts due to high interest rates or lack of perks and benefits. Just ensure that you replace it prior to closing the account to prevent an increase in your credit utilization ratio.
How Many Credit Cards Are Needed For Good Credit?
On average, Americans own 2-4 credit cards. With that being said, there is no ideal number of credit cards that one should own in order to obtain good credit. How many credit cards an individual has is variant on his or her financial needs and goals. However, having more available credit is better than having little available credit when trying to build credit. At the end of the day it’s about how well you manage the credit cards that you do have.
Whatever your decision is for the amount of credit cards that you want to own should suit your lifestyle and financial goals. Think carefully about the responsibility of owning numerous cards. But also think about the benefits and assistance that credit cards can provide you for maintaining your life and financial goals. Many banks such as Bank of America offer wealth management classes to get you started.