Due to the bailout and current recession we have been experiencing for the past year or so many banks and financial institutions are afraid of losing more money. As a result, they are changing the rules and implementing new guidelines for credit card holders. If you haven't used a credit card in the past 6 to 12 months you are at risk for having your account closed or your credit limit reduced. If your limit is reduced or the account is closed this will lower your credit score. If doesn't matter what your previous payment history was or what your credit score is.
Some credit card companies that are practicing this are: Citibank, HSBC, Chase, Capitol One and Washington Mutual. Many credit card companies are doing this without notifying customers. If you have been a victim of this check your credit card disclosure agreement. If you don't have a copy asked the credit card company to send you a copy. Read it carefully. If it is not mentioned in your credit card disclosure agreement then call the company and complain. Here are 5 ways to reduce your changes of having your limit reduced or your credit card account closed.
1. Order a copy of your credit report from annualcreditreport.com. If you have already received a copy within the past 12 months you can still order a copy from the website but you will have to pay a small fee of $6 per report from each credit bureau: Experian, Equifax and TransUnion.
2. Check your balances. Review your credit card accounts and pay down debt on the cards with the highest balances to prevent the accounts from being closed or the limits reduced. For accounts that have not been used in a while and that have a larger limit, buy something cheap like milk and bread or a pair of socks and pay the bill off right away. Do this every 3 months to show activity on the accounts. Don't worry about credit cards with balances less than $1,000 or new accounts opened within the past 24 months because they won't impact your credit score as much if they are closed.
3. Ditch the small potatoes. You may want to close any credit card accounts that haven't been used in 1 to 2 years that have a limit of $500 or less and have a zero balance. If you have more than one credit card in this category only close one of these types of accounts every year. This will prevent your credit score from being impacted as much. This will prevent the credit card companies from closing your account and reporting this on your credit report. In some cases, credit card companies will report "closed by creditor", "account closed by credit grantor", "closed at creditor's request" or something similar. This greatly lowers your credit score.
4. Negotiate. If you have an account that has been closed and you use your credit card to make ends meet or pay for basic necessities I would recommend calling the credit card company and letting them know that you need your credit card. They should be sympathetic and re-open your account if it was closed or increase your limit if it was reduced. If that does not work call back and ask to speak to a supervisor. Follow-up all correspondence in writing. If that fails file a complaint against the credit card company with the Better Business Bureau and Federal Trade Commission.
5. Find extra money. Sell new and unused items on eBay or Craigslist. Get a part-time job and find ways to reduce expenses to get extra money to pay for basic necessities to make up for the loss of using a credit card that was closed or the limit was reduced.
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