Yes, Your Credit Card Can Be Closed without Warning. Here’s How to Prevent It

Having access to credit can be essential during a setback, and many people have set a credit card aside for emergencies. But they may be surprised when their credit card issuer cuts the card’s credit limit — or cancels the card altogether — without any warning. 

In general, credit limit cuts are more common than account closures. Still, an unexpected change can be frustrating. It may even hurt your credit scores, limiting your ability to get credit elsewhere. 

Lenders can close your cards or cut your limits — here’s how to stop them

A recent survey found that’s what happened to about 62 million cardholders during the first four months of 2021. On average, over half a million cardholders experienced an account closure or credit limit cut every day. 

“Banks close card accounts and slash credit limits primarily to reduce their own risk,” explains Matt Schulz, chief credit analyst at LendingTree. Card issuers may do this when they see changes in a particular cardholder’s creditworthiness or behavior. But it can also happen in response to larger economic forces — such as rising unemployment rates and uncertainty due to the pandemic. 

“The basic idea was that if you weren’t using that card before, they didn’t want you to use it during the pandemic because they were scared you wouldn’t be able to pay it back,” Schulz says. He also points out that card closures and credit limit cuts can happen in the best of economic circumstances.

“There’s no foolproof way to keep a bank from closing your account or reducing your credit limit,” Schulz says. “However, there are steps that you can take to stack the odds in your favor a bit.” 

Here are five methods you can try:

1. Use the card for one recurring expense a month

Credit card issuers make money by collecting fees and interest from cardholders, and by collecting a small fee from each transaction. If you aren’t using your credit card and it doesn’t have an annual fee, the card issuer has little incentive to keep the account open. 

One way to get around this is to use the credit card for a small monthly bill, such as a subscription fee. “That keeps the card active every month, but does so in a way that is predictable and easy to pay off,” Schulz says. “Just set up autopay on that card and you’ll be in good shape.”

2. Dedicate it to a certain type of purchase 

Another way to keep your credit card active is to always use it for a specific type of purchase. For example, you might have a credit card that gives you bonus rewards at grocery stores. Make the card your dedicated “grocery card,” and you’ll consistently use it while earning extra rewards. 

3. Update your income information 

Your income can also be a factor in whether the card issuer changes your credit limit. If your income has increased since you first opened the card, updating your income information could help prevent a credit limit cut. It might even lead to a credit limit increase. 

“In many cases, you can list your spouse or partner’s income as your own on a credit card application,” Schulz says. “If you’ve recently been married and your significant other also contributes income to your household, you may be able to include that income with your own when talking to the card issuer.”

Card issuers may periodically ask for an update. But you can also update your income at any time online or by calling the issuer. Considering it may have been years since you opened the card initially, your income may be vastly different. The average annual raise is estimated at 3-5%, so while that may seem minor paycheck to paycheck, over time can add up. 

4. Focus on improving your credit

Card issuers routinely check your credit reports and credit scores to see how you’re managing your credit overall. They may proactively shut down your card if they notice you’re missing payments on other accounts or using more of your available credit with other credit cards.

Try to make at least the minimum payment on all your accounts to avoid late payment fees. Making sure none of your accounts go 30 or more days late can also keep late payments from hurting your credit.

If you can, also try to only use a small portion of your available credit limit on all your credit cards. 

5. Reach out to the lender ASAP

Credit card issuers might give you a warning that they’ll shut down credit cards that don’t have any recent activity. Using the card for at least one purchase could be enough to prevent the closure.

But card issuers are also allowed to close your card or lower your credit limit without any notice. If this happens, try reaching out to the card issuer right away and see if there’s anything you can do to get the decision reversed. 

You may need to give them a reason — such as a recent income increase or an explanation about how you have the card for emergencies. If the card issuer agrees to reverse a credit limit decrease, you don’t need to do anything else. However, if they offer to reopen a closed account, you may want to double-check that they’re not misinterpreting your request as a desire to apply for a new card. 

When saying goodbye is the right move

While having a credit card closed or a credit limit lowered without notice might not feel great — it’s not always a bad thing. If you rarely use a credit card that has an annual fee, letting the card go might be the best option. Similarly, if you’re often tempted to overspend because you have a lot of available credit, a lower credit limit might make sticking to your budget easier.

Having less available credit can lead to a higher credit utilization rate — which might hurt your credit scores. But you may be able to counter this by getting a credit limit increase or using less credit on your other cards. 

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