Was your credit card cancelled? Did you make these mistakes unknowingly? Find out
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Five mantras to use your credit cards wiselyCredit cards have become a very useful tool especially when there is a need of financial aid in an emergency. They were tough to secure once, but times have changed, and now getting one has become very easy. Earlier, there were a list of factors like how much you earn, or how much is your capacity to repay, your details with other loans, etc. would be taken into consideration. But now, almost every bank is offering you a credit card even with low salary up to Rs 15,000 - Rs 20,000. The moment you open your salary bank account, you are given the option to even avail a credit card.
According to RBI data, number of outstanding credit cards as at the end of July 2018 stood at 40153868. Among these, a total of 804,212 transactions were made using credit cards at ATM amounting to Rs 3,723 million. Meanwhile, about 14.500 crore transactions were made at Point of Sale (POS) using credit cards worth Rs 477,585 million.
This does indicate, customers are finding credit cards very flexible and easy to use. Surely, credit cards do help you in times of need when your salary does not stretch far enough, but they also give you sleepless nights in many ways. Interestingly, there can be moments where your credit card is just cancelled and you are not even aware of the mistakes you may have made that caused the bank to take this drastic step.
Hence, if your credit card is cancelled, you might want to go through this list of mistakes.
Did you stop using your card
There are some card issuers who do not charge you any fees for not using your credit card for several months, however, there are some issuers who charge an annual fee which can be waived on using the credit cards.
Meanwhile, others just skip the fee pattern, and cancel your credit card for being inactive for several months.
If you want to avoid this, there are credit card terms which guide you on how often a customer must use his or her credit card in order to keep it open.
For being safe, you can use your credit card every three or four months to keep it open and active.
Did you stop making payments
This one is very serious case for every bank. Just like every other loan tools, credit cards also have similar borrowing pattern. There are interest rates and minimum payments that one must follow in order to maintain a good credit score.
However, while in need of cash, you thought using credit card was best option without planning on how to repay it, then you may see your credit card getting cancelled soon.
Not all creditors cancel your credit card after only one missed payment. Some are suspended for short period, and are levied with charges till the time repayment is carried.
Interestingly, your credit card will be charged-off and closed completely after 180 days or six months of non-payment.
Are you having bad credit score
Because, you made late payment, creditors start charging you late fees and interest rate, this makes it even more difficult to clear your debt. This affects your credit score negatively.
The more you delay, the more your credit score gets dragged down. Having a good credit score is of utmost importance, as it is one of the most important factors that a lender looks at while deciding whether you should get loans like home loan, personal loan and vehicle loans. Your credit score is like a guarantee on what is your capability of repaying debt.
Interestingly, creditors cannot increase your interest rate because of late payments on other accounts (unless the account is with that credit card issuer), they can actually choose to close your account completely.
Did you reject a rate increase
Generally, before increasing your interest rate on annual fee, credit card issuer gives a timeline of 45 days as an advance notice to make accept the new interest rate.
In that period, you can chose to reject the terms and pay off your account on old terms. Credit cards are linked with interest rates, which are also a sort of an income for banks, hence, when you decide not to opt for the new rise in rate, a creditor closes your card on rejection.
Is your credit card near expiry?
This is a very common method. Every credit card has an expiry date mentioned on them, which simply means, that you are eligible to enjoy benefits of that card only till that period of time.
You can exchange the expired one with a new credit card. Banks do offer that facility.
Is your creditor trying to get rid with old cards
Apart from expiry date, this is also one common reason to why your credit card gets cancelled. Every now and then, creditors continuously review their credit card portfolio and get rid of credit cards that no longer fit.
However, before bringing in a new credit card, the issuer has to send an advance notice enclosing the deadline for closing of older credit card, and how to opt a new one.
There are possibilities, that you may be able to transfer your account to another credit card under the card issuer's offerings.
Is your bank getting shut
Unfortunately, you cannot do anything about this situation.
Some credit card issuers are forced to eliminate their own operations when they are no longer profitable.
There are cases, many credit card issuers sell their credit card accounts to a new credit card issuer.
Still, the new card issuer will close your current credit card and ask you to apply for a new account if you want to do business with them.
