If your ability to use a credit card gets abruptly shut down by your credit card company, there are several possible reasons why. Sometimes the problem can be solved with just a phone call to the issuer, while other situations – such as delinquency with your monthly payments – might result in permanent closure.
The next steps you take are crucial. Contact the company to find out what happened, and if needed, develop a plan to regain the full power of your credit card.
Why Are Credit Card Accounts Suspended?
Credit card issuers have the right to suspend or close your card without warning for reasons such as nonpayment, inactivity and suspected fraud.
For example, the company might freeze your account temporarily if your card was used for a major purchase out of state that didn’t fit your usual pattern. If you made the charge, you should call the issuer to acknowledge you made it.
If your card was canceled by a credit issuer because of inactivity, you could make a case with the company to reinstate it, with the commitment to use it more regularly.
A shutdown due to nonpayment can be more complicated. It shouldn’t be a surprise to have charging abilities taken away if you haven’t made a minimum payment in a few months. Even if you were making on-time monthly payments for years before missing payments, you can’t expect a company to overlook current delinquency problems.
For the credit card issuers, “it’s not necessarily what you looked like in the past, it’s more like how you look right now,” says John Ulzheimer, a credit expert who has worked at Equifax and FICO.
Even if you’re confronting your debt repayment problems head on, such as through a hardship program or debt management plan, an issuer will very likely revoke your ability to charge on the card temporarily and might even close it permanently.
Hardship programs and DMPs are often the result of a major life disruption – such as a job loss, medical issue or divorce – that puts your financial world into a tailspin. A hardship program is when you work with the credit card company directly to address your situation, and a debt management plan is developed with a credit counseling agency to tackle multiple credit card debts.
Your account will be suspended or closed while you’re on a payment plan because you’ve taken on so much debt, and “the best way to get out of a hole is to stop digging,” Ulzheimer says.
“Normally a DMP is on the tail end of missing payments and cardholder instability,” Ulzheimer says. “It’s usually something that’s possibly already resulted in missed payments or soon will be associated with missed payments.”
The good news is that a DMP or a hardship plan could shrink your payments and interest rate to help you get back on track. It may be easier to make regular payments and improve your overall credit standing.
First Steps to Take After a Suspension
A suspension can serve as a reminder that your credit card agreement is essentially a loan – one that you are expected to pay back. The first step is to find out why your account was suspended. Get in touch with the issuer and determine whether the reason is fraud, inactivity or nonpayment. Inactivity or fraud suspensions may be resolved with a single contact, but nonpayment will require more action on your part.
Typically, issuers will expect you to bring your account current as soon as possible to reverse the suspension. Then, once the account is made current, it’s vital to meet your monthly obligations.
“Generally, the way to get back into good graces (with an issuer) is to make payments on time,” Ulzheimer says. “That good data changes their minds about you.”
Another way to make sure the creditor understands you can handle a credit card is to make more than just the minimum payment each month.
Nancy Bistritz-Balkan, vice president of communications and consumer education at Equifax, says, “Paying more than the minimum payment due and paying the balance in full each month indicates that you are comfortable with the level of debt you owe.”
Robert Dunn, vice president of counseling at Consumer Credit Counseling Service of Buffalo, says what is most important for a suspended account is that “on-time payments are being made on that account, and that if, and once the suspension is lifted, the card continues to be used regularly and responsibly, meaning payments are made on time, the balance is kept as low as possible, and the card is used at least close to a monthly basis……Read More>>