You may have faced this situation in the past: you give your credit card to a waiter after having a mouthwatering dinner. The waiter comes back to you after a few minutes and tells you politely, "sorry Sir, your credit card has not been accepted". You pay the bill with cash and call the credit card company immediately. The customer care officer informs you that your credit card account has been closed.
You're completely dumbstruck. You have always made timely payments on your credit card. How can the credit card company do this thing to you?
Well, you're not the only person who is facing such a predicament. Thousands of consumers are facing the same problem in the country.
The much talked about Credit Card Act of 2009 doesn't safeguard consumers from credit card cancellation. The credit card companies have still the final say on the credit card cancellation.
When can a credit card company close your account?
The credit card company can terminate your account when you're unable to fulfill the terms and conditions of the agreement. If you make late payments, miss out payments for a long period of time, cross your credit limit, file bankruptcy, etc. then the credit card company can close your account immediately.
Credit card companies are keeping a close tab on your credit profile. They check your payment history, spending activities, credit score, etc. on a regular basis. If they find any suspicious activity or feel you're less likely to make payments in future, then they won't hesitate to close your account immediately.
It is not that your account will be closed only when you're making late payments. If you seldom use your accounts or you've not used the credit card in the last few months, then also your account can be closed. The credit card companies feel that it is better to give that account to a person who will use it regularly and rack up interest rates.
Are you supposed to get advance notice from the company?
Credit card companies are not legally bound to give you an advance notice about the credit card cancellation. Keep it in mind that the Credit Card Act requires the credit card companies to give you a 45 days advance notice before an interest rate hike or any change in the terms and conditions.
The truth is, credit card companies can close your account due to several reasons as per the Equal Credit Opportunity Act. In case, the credit card company terminates your account due to poor condition of your credit report, then they'd have to inform you within 30 days of taking the necessary steps.
What can you do to avoid credit card account closure?
There are certain steps that you can take to avoid credit card account closure. It is not certain that the credit card company won't close your account after taking the below mentioned steps. This is because credit card companies have various parameters. Still, these steps are not totally ineffective also.
- Make the minimum monthly payments by all means
- Keep the account active by making purchases
- Review your credit report and find out if there is any wrong information
- Check your credit score
Go through various financial forums and find out if consumers are complaining about the cards cancellation. Find out if your current creditors often close the accounts of the consumers. You won't know for sure if your account will be closed by the credit card account. However, you'll surely get a warning bell and take necessary actions.