Can Your Credit Card Be Canceled Without Your Knowledge?

Posted by CardOffers.com Staff | October 9th, 2009 | General Information, Help & Tips

Many people are surprised to learn that credit card providers do have the ability to cancel an account without any prior notice. Although this information is often included in the terms and conditions of a credit card application, many individuals do not take note of the provision when applying for the credit card. In fact, until recently, most consumers never gave the idea any thought at all.

For the most part, many people associate a credit card cancellation with one or two things: either the credit card is stolen, or the cardholder has not kept the account current, prompting the issuer of the card to take action. While these two scenarios can and do occur, not everyone who suddenly finds that their card is no longer active is the victim of theft or has demonstrated poor management of their line of credit.

Over the last couple of years, businesses and individuals who are current on their accounts and have never been a day late with their card payments suddenly find that their cards are no longer valid. Unfortunately, many discover this fact when they attempt to use the card to pay for a purchase at a store or a meal in a local restaurant. When they frantically call the customer service department at the credit card company, they find that the only information they can obtain is a confirmation that the card is indeed canceled, but the representative is unable to tell the consumer why.

So what happened to generate this sudden increase in unanticipated credit card cancellations? The recession. Lenders of all types, including banks that issue credit cards, are taking steps to protect themselves from default on those credit card balances. This means that they are looking closer at credit reports, paying more attention to the income to debt ratio of each customer, and, in some cases, choosing to end the relationship immediately.

While individuals are feeling the brunt of this type of action, businesses also sometimes find that their corporate accounts are suddenly deactivated for no apparent reason. The situation can be extremely embarrassing, especially when attempting to pay for a dinner out with a client or using the account to pay for goods or services necessary for the operation of the business. As with individuals, irate business owners do not receive notification of the credit card cancellation until the card has already been deactivated.

It is important to note that, while all banks have been taking steps to minimize their risk during the recession, there are those that focus their attention on only closing accounts that have been inactive for a year or more, or accounts where there is a consistent record of late payments. Still, the number of providers that are beginning to close the accounts of what appear to be perfectly reliable and stable individuals and companies is growing.

When pressed for a reason behind account closures, the general one given is simply one of reassessment. If in reviewing account details and credit information, the provider determines that an account holder, even one who is current and has been that way for some time, presents an unacceptable risk to the provider, given the specifics of the current economic climate, the account is deactivated immediately. The only remaining activity that is allowed is the receipt and posting of payments on the outstanding balance.

From the perspective of the banks that are closing these accounts, they are simply being proactive. Just as inactive accounts are closed to protect banks from possible card fraud, banks see the process of closing accounts that could be a problem a year or so down the road as simply keeping their houses in order. By being proactive, they save time, money, and also protect their other good customers who would be negatively impacted if the bank fell on hard times and could no longer maintain the same level of customer support it does currently.

But how is it that banks can take this action without first notifying the customer? Simply put, there is no requirement that the provider give notification in advance. The terms of the Equal Credit Opportunity Act only require that providers notify a customer of the closure within 30 days of actually closing the account. Even then, there are exceptions, such as when the account is closed due to a prolonged period of inactivity. In other words, your obviously active account can be closed today, and notification of the closure can be put in the mail five or six days later, and still fall well within the requirements of this act.

Many have wondered if the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 will change the current policy on notifications. Unfortunately, it won’t. While the CARD Act does make changes in several other processes and procedures that some credit card companies use, this is not among them. Your card issuer still has the right to cancel your card at any time and notify you of the reason at a later date.

Because not all credit card issuers are choosing this course of action, there is some opportunity for you to find another issuer. However, it is important to spend some time checking into the consumer ratings of any provider before making a change. By taking the time to read credit card reviews and critiques, you can quickly identify which banks are closing accounts with some regularity, on the basis of reassessment. When you compare the credit card ratings to the benefits associated with the account, you can come to your own conclusion about the degree of risk you are willing to take on in order to do business with that provider.

Only after you have looked into each credit card deal carefully should you move forward with submitting any credit card applications. Fortunately, some of the best credit card offers out there are from banks that have not yet begun the process of closing accounts on the basis of what might happen in the future. This means that you are not left with inferior credit offers that carry a higher rate of interest or that do not provide the rewards or benefits that you are accustomed to receiving

Tags: closing a credit card, credit card accounts
Filed under: General Information, Help & Tips |

8 Responses to “Can Your Credit Card Be Canceled Without Your Knowledge?”

1. Dorothy Franklin Says:
   October 22nd, 2009 at 3:51 pm

   Merrick Credit Card is one that will close your account even though it has been paid on time. I advise everyone to review Merrick Card cards terms before applying for a card with them. I did not know of there bad reputation and practices unfortunately until after I had applied for the card, and even though they approved me for a credit line of 1000.00, I decided to give them a try. However they proved that the negative reviews that had been posted about them were absolutely true. I paid my bill each month and they closed my account because I had the same credit cards that i had (which have all been paid on time)and had at the time I applied for their credit card. Although this does not make any sense to me, I am not mad at Merrick bank, because they have proved that the bad reviews they have received are true. My advise to anyone applying for a MERRICK CREDIT CARD, is DO NOT!and if you have SEND IT BACK. I am real sorry I did not. Do not make the same mistake I did.

2. ApplyForCreditcards Says:
   January 12th, 2010 at 7:19 am

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3. Brian Dickson Says:
   January 24th, 2010 at 2:36 pm

   Is there is any way to have the “cancelled” credit card history cleared from my credit report? A Credit Card company cancelled my card. This will apppear as negative on my credit report for a period of 10 years. This is true even if you have never missed a payment or had a late payment on this card or any other card, ever. It is the fault of the credit card company for getting into a situation where they have to cancel cards for people who have perfect credit. They should have responsibility to expunge the records. Surely, there is some way to get it right.

4. Tannia Says:
   October 30th, 2010 at 4:24 pm

   My OneStop Visa was granted 2 years ago and I’ve kept a perfect payment record to date. 3 months ago, my account was suddenly cancelled. The company claims my past credit history is to blame. I don’t believe it because I was granted the card with the same exact credit history.
   I had recently called OneStop Visa to requested a lower interest rate for the second time. It seems to me this was the real reason for the cancellation.
   I am upset because in my credit report is shows the account “cancelled at provider’s request”. So sad they do these things! I have every intention of paying my balance.

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   November 30th, 2010 at 10:03 am

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