5 Reasons Your Credit Card Company Might Close Your Account

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Sometimes we get a letter in the mail. Sometimes we go to use our cash back card and it gets declined, so we check our online banking only to realize the card has been cancelled by the issuer with zero notice.

No matter how you find out, having a card canceled by the issuer can be a huge pain. And, often, a mystery, since they're not required to tell you why.

If you're looking for a bit of closure, consider these reasons why an issuer might cancel your credit card .

1. You don't use it enough

The most common reason issuers close card accounts is that the card isn't being used. It costs them money to maintain and manage your account, so they may decide to cut their losses.

How long a card can sit in the proverbial sock drawer will depend on the issuer, the card, the market, your banking history, your credit history... -- you get the picture.

Cards with annual fees are generally less likely to be closed for inactivity (as long as you're paying the fee on time). Having an annual fee isn't a guarantee against closure, however. Personally, I try to use my cards for purchases at least a couple times a year.

2. You broke the terms of service

Financial institutions have a lot of regulations, and one of the big ones is that they can't be caught mixed up in anything illegal. If an issuer thinks you're using its cards for nefarious purchases, then you can expect your account to be closed.

You may not need to actually break the law for your activities to get your account closed, however. Anything that breaches the terms of service can be grounds for the issuer to close your account.

For example, if an issuer has specific rules about gift card purchases, it may close your account for using gift cards to manufacture spend. Similar rules apply to people who churn cards for welcome bonuses.

3. You haven't been making your payments

If you stop making your credit card payments, the issuer is going to eventually close your account. You need to make at least your minimum payment by your due date every month to keep your account in good standing.

Yes, this applies even if you have an intro APR offer and aren't accruing interest. You still need to make your minimum payment every single month.

4. The card product isn't being offered anymore

Sometimes issuers just stop offering a certain card. In this case, usually one of these three things happens:

1. You keep your card and features, but no new users can apply.
2. Your discontinued card product is turned into another card product.
3. All existing cards are closed. You pay any outstanding balance and everyone moves on.

In my experience, the first two cases are far more likely than the last. But it does happen, particularly with cobranded and retail credit cards.

5. You no longer meet the requirements for the card

This one is the most nebulous and hard to predict, but an issuer could close your account if you have a sudden and drastic change in your credit reports or stated income.

For instance, say you have a sharp drop in your credit score from a missed loan payment. Even if your account is in good standing with your card issuer, the change in your risk level could cause the issuer to close your account.

Don't think that every little change to your credit will result in all of your cards being cancelled. Broadly speaking, issuers are more likely to simply lower your credit limits than to close your account. But it does happen.

How to avoid account closures

Maintaining good credit card habits is the best way to avoid unwanted cancellations. This includes:

• Use your cards to make purchases regularly.
• Make at least your minimum payment on time every month. Ideally, pay in full.
• Don't aggressively chase welcome bonuses/churn cards.
• Avoid purchases that go against the card's terms and conditions.
• Pre-emptively contact your issuer if you think you may miss a payment.

Unfortunately, there isn't much you can do to avoid having a card discontinued. In that situation, just embrace the opportunity to find a new card that may better fit your needs and lifestyle.

Change is better than suffering the ennui of endless sameitude.

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