Top 4 Reasons Why Your Credit Card Just Got Canceled

For better or worse, credit cards can be a great convenience or a way to cover important, necessary expenses. So when you open a letter from your creditor to find out your card has been canceled, it can be shocking. And while the reasoning may be related to your own actions, it’s not always true.

However, in most cases, there are steps you can take to prevent this from happening again. Here are the top four reasons why your credit card may have been canceled and how to avoid them.

1. You have stopped using the card

If your card has been sitting in your wallet for several months without being used, it is possible that your credit card company will decide to cancel it. This decision will be left to the company’s discretion.

So, technically, there is no set “safe” period during which you can stop using a card and avoid cancellation. But if you can make at least one purchase with this card every few months, you should be able to avoid this happening again in the future.

2. Your account is in default

If you are late on your payment for an extended period of time, your credit card company may choose to close that account and require payment of the full balance.Typically this happens if you have missed payments for 60 to 180 days.

If this is the reason your card was closed and you can’t repay the amount listed, you may need to consider an option like bankruptcy to get that debt discharged and avoid having your assets frozen or seized. But it’s always worth contacting your credit card company first to see if they’re willing to accept a payment plan or other option.

3. Your creditor is phasing out your card

Sometimes the decision to cancel your card has nothing to do with your own actions. And if a company has made the decision to stop offering a certain credit card, it may also choose to phase it out for existing customers, resulting in a cancellation. This is unfortunately unavoidable for cardholders.

But the company may offer an alternative card in this case, which can help preserve your credit score by keeping your credit available, especially if it doesn’t require a hard credit inquiry.

4. Your credit score has dropped dramatically

Once you have a credit account with a company, they can check your credit at any time. But if the company sees that your score has dropped significantly since you opened the card, they may decide to close it because you are no longer eligible for that card. This can be extremely frustrating and can further lower your score by increasing your credit utilization ratio (the percentage of credit you are using compared to what you have).

To prevent this from happening again in the future, it’s best to keep track of your score. That way, you can take advantage of tools like personal loans and 0% interest balance transfer cards if you need access to funds to deal with a financial emergency or if you start taking on high-interest debt and want to avoid problems like defaulting.

Credit card companies have a lot of power when it comes to deciding whether to close your account. But if you can avoid these four common reasons, you should be in a good position to avoid that surprise and maintain access to credit when you need it.