5 Reasons a Credit Card Company Might Cancel Your Card

Credit card companies are usually eager to get new customers to sign up for their cards or convince existing ones to apply for another card.

After all, the more credit cards being used, the more money the card issuers make from accruing interest and swipe fees.

But there are a handful of times when a credit card company might cancel your card. Here are five of the most common.

1. You're not using your credit card

One day, I got a letter informing me that my credit card account, which I had for years, was being closed. I was shocked; I had no idea credit card companies closed accounts. I always figured they wanted to keep them open!

As I read further down the letter, my credit card company said the account was being closed due to inactivity. Apparently, credit card companies only make money from cards if you use them. Who knew?

To avoid getting your credit card account closed, use the card at least once per month. If you need an extra incentive to keep using it, check to see if you earn cash back rewards. If you think you'll forget to use the card, put a recurring bill, like your monthly internet service, on the account to make it automatic.

2. There was a significant drop in your credit score

Just because you were approved for a credit card in the past doesn't necessarily mean you're entitled to keep using it. Credit card companies check your credit accounts regularly to see if you've been keeping up with your other payments.

They do this to assess how risky you are, and, in some cases, they may cancel your account if you're behind on too many of your accounts or if your credit score has dropped significantly.

The good news is that these regular checks can also work in your favor. I paid off a credit card balance recently, and my credit limit and score went up as a result.

3. The credit card company is reducing its own risk

I don't want to have to say it, but sometimes, it's not all about you. Credit card issuers may cancel your card because they need to reduce risk.

A few months into the COVID-19 pandemic, credit card issuers closed accounts and reduced credit card limits for 70 million cardholders. The disruption to businesses and the potential for a large reduction in people's wages caused card issuers to turn off the credit spigot for some borrowers.

4. The card is no longer offered

It's possible for your credit card to be canceled simply because the issuer no longer offers it. In some cases, you may still be able to use the card or switch to a different card, but not always.

If you find your card is no longer offered, and your account is being closed, contact the company to see if there's a different card you can apply for. You may also want to reach out to learn what will happen to your credit card rewards, such as travel miles, once your account is closed.

5. If you stop making payments

Unsurprisingly, if you stop making payments on your account, your credit card company may close it. This is often called a "charge-off" and it typically happens if you're 120 to 180 days late on your payments.

But keep in mind that your card issuer could also close the account if you're not meeting the minimum monthly payment required. Once the account is closed, your debt could be sold to a collection agency.

If you need to catch up on your payments, contact your credit card company immediately to see if you can work out a repayment plan.

If you use your card regularly and make payments on time, there's a good chance your account won't be closed. If you want to keep your account in good standing but don't want to rely on using the card too much, set up one or two automatic bills each month.

And, take it from me, if you get a letter from your credit card company telling you they're about to close your account, and you don't want that to happen, pick up the phone right away!