An issuer closed my credit card account without notification. Why?

Credit cardholders look to their cards as a convenient and ready source of financing. You might be surprised to learn a credit card issuer can close your account without notification for a variety of reasons.

If this has just happened to you, stay calm. We’ll cover what you should do in this situation and break down what happens to any rewards you had on the card.

Why was my credit card closed without notice?

While you can manage your account responsibly and avoid being in this situation, you could still find yourself impacted by a card closure. Adding insult to injury, a card issuer doesn’t even need to notify you in advance if it decides to go ahead and close your account.

Here are the most likely reasons your credit card account was closed:

1. You don’t use your card

If you carry multiple credit cards and tend to favor some of them more than others, it may be that you are just not using one of the cards. Depending on your spending patterns and the rewards the card generates, it may be that you rarely turn to this card to fund your purchases.

That sort of strategic spending can be good for you, but it isn’t in the best interest of the card issuer, particularly if the card doesn’t carry an annual fee. The issuer is trying to generate business off your account and has allocated a part of its lending power to your account.

If you don’t use this card, your account remains inactive and does not generate the fees the issuer would receive were you to use the card. Thus, they may feel inclined to close it altogether.

2. You didn’t accept new terms

Another reason could be that the issuer changed the terms of the card, and you did not accept them.

The Credit Card Accountability Responsibility and Disclosure (CARD) Act lays out that a card issuer has to send you advance notice of such significant changes, which could also include a hike in late payment fees or cash advance fees, among other things. It will have to give you notice 45 days in advance and allow you to opt-out if you don’t accept the changes. If you do choose to opt-out, the card issuer is free to close your account.

There are other changes, such as raising your minimum payment, for which the issuer has to give you the same advance notice, but doesn’t have to give you the right to opt-out. And when it comes to closing your account, the law doesn’t require advance notification.

3. You didn’t comply with card terms

One reason for card account closure that might be more in your control is whether you adhere to the terms of the card or not. For instance, you should be careful to make at least your minimum payment by the date your payment is due.

If you repeatedly make late payments, that could be a cause for concern. And if your payment doesn’t go through, say your check bounces, and this happens more than once, your issuer might want to review your account.

If you stick to your end of the contract, you will remain in the card issuer’s good graces and not give it cause to close your account.

4. Your circumstances changed

Another reason why an issuer might close your account is if your income declines, maybe due to a job loss. The card issuer might also discontinue a card, in which case all those who hold that particular card will be impacted. In this case, the issuer could decide to switch you to a similar card.

5. Your credit score dropped significantly

Life happens, and sometimes you may find yourself unable to make a payment on time or slowly gaining debt on your credit line. If this happens enough, you may see a substantial drop in your credit score. If your payment is 30 days late or more, your account may be marked as delinquent and reported to the three major credit bureaus, which could be cause for your issuer to eventually close your account.

What should I do if an issuer closes my account?

Whatever the reason, if you did not want to close the account and want to hold on to your card, your best bet is to negotiate with the issuer directly:

1. Accumulate your most recent credit card statements if possible and determine the most likely reason for your account being closed.
2. Contact a representative from your credit card issuer. You can call the number on the back of your credit card.
3. Tell them that you want to continue using your card and see what they can do for you.

What happens to my existing rewards?

As for any rewards you have on the card, whether you can retain them after a card’s closing depends on what type of rewards they are. If they’re made out by your card issuer itself, you will most likely not have access to them following a card’s closing.

However, if the rewards are issued by another entity, such as miles issued by an airline, in a tie-up with the issuer, you will likely be able to hold on to those miles.

How does an issuer closing my card account affect me?

Along with no longer being able to use your card, the biggest potential impact of having your card account closed by an issuer is on your credit score (often a negative impact). Whether an account is closed at your request or by an issuer without notification, your credit may be affected in two or three key ways:

1. You’ll have less available credit (and a higher credit utilization ratio)

When one of your card accounts closes, you’ll lose access to that line of credit. This means you’ll have less total credit available for purchases across your card accounts. For example, if you had three cards each with a $2,000 limit and then one of them was closed, your total available credit would drop from $6,000 to $4,000.

With less available credit, any balances you’re carrying and any purchases you make will represent a larger percentage of your available credit. In other words, you’ll be using more of your credit, giving you a higher credit utilization ratio.

Credit utilization is a key factor in building and maintaining a good credit score, making up 30 percent of your total FICO score calculation. So, if one of your accounts is closed, you may see your score drop due to higher credit utilization.

2. The length of your credit history may shift

Depending on how recently you opened your card account, having that account closed could have a noticeable impact on the length of your credit history, which considers factors in the age of your oldest and newest credit accounts as well as the average length of time all of your accounts have been open.

In short, when it comes to your credit score, the longer your credit history, the better.

So, if the account is one of your oldest, having it closed will likely hurt your score. On the other hand, if the account is newer, closing it may not have as big of an impact on the length of your credit history.

While length of credit history only makes up 15 percent of your FICO score, it’s still a key factor to keep in mind if you’re facing an account closing.

3. Your credit mix may be disrupted

If the account was your only revolving credit account, having it closed will reduce the variety of credit types you have to manage, referred to as your credit mix.

Having a diverse mix of credit types, including both revolving credit and installment loans, helps demonstrate to lenders that you’re a responsible borrower who can successfully manage credit cards, personal loans, a mortgage and more. For your credit score, the more variety in your credit mix, the better.

With one less type of credit, your score may drop. However, credit mix only makes up 10 percent of your FICO score, so while it’s worth being aware of, it’s far from the most impactful factor.

The bottom line

A card issuer can close your credit card without advance notice. If you haven’t been using your card, or you violated the terms of your card account, that could lead the issuer to close it.

If you want to hold on to a certain card, you should make at least minimal use of it and stick to its terms of use. In the event that an issuer closes an account you wish to keep using, be sure to call your issuer and try to negotiate with them.