In the past ten years, I’ve opened and closed a few credit cards. But within the past five years, I’ve decided to keep only three major credit cards and canceled the rest.
Of the three, I primarily use the Visa and American Express for everyday purchases. But I prefer American Express because I get rewards for more places, such as The Home Depot (although I prefer to shop at Lowe’s - the service & selection is much better!). But one card I never use is my Capital One MasterCard. I kept it mostly as a back up card and fortunately not had to use it for anything.
Lately credit card companies have been changing their customer’s credit limit (meaning lower the amount) even when the customer is in good standing. And what’s also new is that they are canceling the cards to even good standing customers.
Recently I received a letter from my Capital One MasterCard informing me of my account being closed. This was because I hadn’t used the card in years. It was really my “back up” credit card. But I was really surprised at first since I considered myself to be a good credit card holder. I mostly pay in full and on time each month.
Curtis Arnold, the founder of Cardratings.com also got a letter in the mail from a credit card company notifying him it was closing his account. The account he hadn’t used in a while.
When things like this happen to your credit card, it can hurt you credit score. But if you can contact the credit card company first and tell them you prefer the account be closed by you, then it won’t effect it too much. At the time, my Capital One account was set to be closed in two weeks. First I called and asked if they could still keep it open, but said there is no way to “over-ride” this request. Then I asked for them to state that the card was cancel per my request.
“Banks do have to notify their customers in writing if a credit line is being changed. But a reduced credit limit for customers can be more than just an inconvenience; it can hurt their credit score. One of the things that goes into [your credit score] is your ratio of available credit and how much of it you’re using,” says Greg Daugherty, executive editor of Consumer Reports magazine. So if all of a sudden, you have less of it available, it looks like you’re using more. It makes you look like more of a risk — and it makes you a less attractive customer to other lenders.” - NPR Tamara Keith
NBC news also reported that American Express is offering it’s customers $300 to close their accounts. Sounds tempting to me, but I think I rather keep my card. I remember the days when credit card companies were practically giving away free cards. But bankruptcies have been on the rise in the U.S. and fewer banks are offering loans.
The credit card industry is almost like the cell phone industry when it comes to government regulations. Which means not much regulations. And since times are tough for many people, they have resorted to using their credit cards to pay for everyday items. I don’t think it’s the wisest choice to make, especially with the high interest rates.
Although I am sad to lose my Capital One card, I am glad to not be doing business with them. Now I plan to use each card more frequently and pay them off (in full) each month. Maybe use them to pay bills online, buy gas, or other purchases too.
More info:
Credit Card Issuers: Buy Something or Else! - Wall Street Journal
How to cancel a credit card - Bankrate.com
Is your credit card issuer unfair? - MSN
Photo credit: Wikimedia Commons
