Your credit card issuer has the right to cancel your credit card at anytime. You may not even get a warning when your credit card is cancelled. The worst way to find out your credit card has been cancelled is to have it declined. Here are some of the reasons credit card issuers cancel credit cards.
1. You stopped using the card.Credit card issuers aren't allowed to charge a dormancy or inactivity fee to cardholders who don't use their credit cards for several months. While some card issuers charge an annual fee that can be waived if you use your credit card, others skip the fee and just cancel your credit card if you stop using it. Use all your credit cards every three or four months to keep them active.
2. You stopped making payments.Regular minimum payments are a requirement of your credit card agreement. Not many creditors cancel your credit card after only one missed payments. Some will suspend simply your charging privileges after 60 or 90 days and let you start charging again if you get caught up. However, your credit card will definitely be closed completely after 180 days or six months of non-payment.
3. The bank is closing.Unfortunately, some credit card issuers are forced to shut down operations when they are no longer profitable. Many credit card issuers sell their credit card accounts to a new credit card issuer. The new card issuer may close the credit card and require you to apply for a new account if you want to do business with them.
4. Your credit history worsened.A recent change in credit card law banned universal default - the practice where a credit card issuer would increase your interest rate because of a late payment with another credit card issuer. While creditors can't increase your interest rate because of a bad credit history, they can close your account completely.
5. You rejected a rate increase or other change.Before a credit card issuer can raise your rate or annual fee, they must give you a 45-day advance notice. During that window you can reject the terms and choose to pay off your account under the old terms. However, many credit card issuers close your account if you decide to reject the new terms.
Consequences of a Cancelled Credit Card Account
A cancelled credit card seldom has a good outcome. More often than not, your credit score will be affected by a cancelled credit card, especially if the credit card still has a balance. Closed credit cards often affect your credit utilization even if the credit card balance is zero because of a decrease in your available credit. The good news is that your credit score can improve over time as you reduce your credit card balances.