Last updated on November 5th, 2020
Life can be full of surprises, both good and bad – and, when our ability to use our credit card is unexpectedly taken away, although it may seem sudden, there’s almost always an explanation. A quick phone call to your card issuer can illuminate what the issue was – and in some cases give you the opportunity to reinstate your credit card quickly; in other cases, however, the closure may be permanent. If you’re wondering how to bounce back from a credit card account shutdown, you’ve come to the right place. If you’ve ever grabbed a magnifying glass (you’ll need it!) and scanned the terms and conditions document that accompanies each of the credit cards you’ve applied for, you’ve probably seen the following: Credit card issuers and banks reserve the right to suspend or close your account, without warning, for a myriad of reasons ranging from non-payment to inactivity, and even suspected fraud. In some instances, the bank may not even contact you to give you a heads up. Sometimes, this shutdown is due to a simple issue or even miscommunication, making it extremely easy to resolve. In other cases, the situation can be a bit more complicated; for example, even if you have a long history of making your payments on or before the deadline and paying them in full, one missed or late payment can cause a credit card issuer to overlook your previously untarnished reputation in favor of an account shutdown, at least temporarily. It can be frustrating, and we’re often left wondering, “What happened?!” when our credit card is cut off without warning. Let’s explore why this could happen.
What are the most common reasons a creditor might close my account?
– Inactivity: The card is inactive with no outstanding balance – Delinquency or default: One or more late or missed payments – Card Program Deactivation: The credit card issuer no longer offers the terms of the account of the card program; the card type has been discontinued. Many credit experts agree that banks often don’t care what your history is; their primary concern is how your credit and payment history look, right now. This focus is one of the predominant reasons that an account can be disabled either temporarily or permanently when you miss even one payment. Missed payments are often the result of a major life disruption – when we lose our job, visit the emergency room or have a serious medical procedure, or go through a divorce, often our focus isn’t on our credit card debt and a monthly payment can easily be swept under the rug. Sometimes the card issuer will take this into account, but this isn’t a guarantee.
What should I do if my credit card account is closed?
The first step is to contact the company who issued your credit card to find out why your account was suspended or terminated. Once you’ve determined whether the issue at hand is inactivity, nonpayment, fraud or something more, you can make a plan to tackle the issue head-on. Typically, accounts suspended due to inactivity or fraud can be fixed quickly, often with one phone call. However, if you’ve missed one or several payments, regaining your account will require more effort on your part. In order to reverse the suspension, you’ll be expected to cooperate fully by bringing your account current – paying whatever money is due at that time, including all late fees, as soon as possible. This will not only will bring you back into good standing, paving the way to reinstate your account, but it will be a significant first step toward bringing the total balance on your credit card account down. Once the account is current, it will be imperative to make on-time payments regularly; meeting your monthly obligations will show the card issuer that you are a customer who can be taken seriously, and not a risk.
My account is now current – What’s this penalty APR?
When a lender flags your credit card account as delinquent due to a series of missed payments, issuers are likely to make changes to your terms. When you signed up for your credit card, you also agreed to a penalty APR that is utilized in the instance that you make a late payment or miss one entirely. Penalty APRs can apply to both new purchases as well as the full balance on a card, and typically average at 29%. Penalty APRs usually apply for at least 60 days after a missed payment, and that time frame can be extended at the bank’s discretion so it’s very important to ensure that you fulfill your monthly obligations when it comes to paying off each statement. Banks and card issuers will evaluate the number of missed payments on your account as well as your overall creditworthiness, and this information will help them determine whether they will apply the penalty APR, and for how long.
What happens when my credit card account is closed, not just suspended?
Each bank and credit card issuer is different, so it’s not always easy to predict if your account will be suspended after missing a payment (which will allow you to catch up with your monthly statements) or if it will be closed outright, which can affect your credit score. If you find yourself with a suspended account, and don’t make timely monthly payments during the suspension, it shouldn’t be a surprise when your lender terminates the delinquent account. Once your face an account has been closed, you can always contact the card issuer to find out the reason why; after all, you may be able to make a case to have them reverse that decision. Remember, having one or more credit card account shutdown due to nonpayment can negatively impact your credit score. While an account shutdown is often final, there are other tools available to help rebuild and improve our credit. If you’ve applied to several new cards and have been rejected for a traditional credit card, consider opening a secured credit card. A secured card allows you to use a limited credit line to make purchases and pay them off, much like a regular credit card; the key difference is that you’re required to make a down payment that is used as collateral, and often determines what your spending limit will be – so the bigger the down payment, the more flexibility you have when it comes to your credit line. Of course, this will vary by card issuer, so it’s important to research your options before you pull the trigger on a new secured credit card.
In conclusion, it’s best not to close your credit card account, if you can avoid it
At the end of the day, your credit score can change in an instant; it’s important to plan ahead and ensure that payments are made on time so that we don’t risk having an account suspended or even terminated. A credit card account can be closed for many reasons, the most common of which include delinquency and late or returned payments – and continued delinquency will just dig that hole deeper. Since a closed account can bring down your credit score, it’s best to avoid when possible – especially when it’s due to delinquency. With proper planning, it’s easy to avoid having an account suspended or closed – and, in the case that this does happen, there are tools available that can help you climb out of the hole you’ve dug.