Making Your Money Last

What to Do If Your Credit Card Is Closed

The issuer may restore your account with the previous terms, or it may request that you reapply for the card.

According to a report from the Consumer Financial Protection Bureau, even good borrowers ex­perienced an uptick of account closures from March to June of 2020. If you were part of the inactivity cull, you may be able to remedy the situation—especially if it’s a card that you relied on as a backup. Plus, a canceled credit card may ding your credit score because it reduces the amount of available credit.

Your credit card issuer is not likely to tell you if it plans to close your account. However, if you’ve signed up with a credit-monitoring service such as Credit Karma, you may receive an alert. If that happens, call your issuer right away to see how to get your card reinstated. The issuer may restore your account with the previous terms, or it may request that you reapply for the card. If you lost points because of the closure, ask if those can be reinstated as well—although the issuer has no obligation to do so. If your card is restored with a lower credit limit, wait six months and then ask for an increase.

In general, credit card issuers don’t want to close your account, because it’s hard to find and keep a good customer, says credit expert John Ulzheimer, author of The Smart Consumer’s Guide to Good Credit. Use cards you want to keep just often enough to keep them active. You could use the card to automatically pay a recurring bill, such as your gym membership or a subscription. When the bill comes in, pay the entire balance to avoid triggering interest charges. Or shop around for a card that has a lower rate or a rewards program that’s better suited to your spending habits (see kiplinger.com/kpf/cards21).

If your credit score took a hit, reinstating your old credit card or applying for a new one should boost your score. When an account is closed, the amount of available credit decreases, which impacts your credit-utilization ratio—the amount you owe as a percentage of your total available credit. This ratio accounts for 30% of your credit score. It’s best to keep your balances around 30% or less of your available credit.

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