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Credit Card Applications » News » Other » Damaging Good Credit

Damaging Good Credit

May 26, 2008
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Credit Companies Warn: Use Your Credit Card or Lose It

A consumer rights organization based in San-Francisco, Consumer Action, warns US cardholders that their credit card accounts may soon be closed, and the reason for the closure may seem to customers ratheroffensive, to put it mildly. Today, if your card company has noticed you to be inactive about using your plastic for three years, it has the right to close your account without a beforehand notice.

It is twice as disappointing to get a card closed if it has no default payments, high credit limit and good debt ratio. Nevertheless, card closure does take place in some of US good credit households.

Why do companies make such anti-consumer arrangements and how can you avoid losing your card once you are at risk?

Well, as to the reason. It might be simple and natural to suggest that companies' decision to close inactive credit card accounts may proceed from the Federal Reserve's new proposed credit rules that operate to curb restrictions on the companies' unfair practices.

Until recently the predatory practice was to keep a delinquent account open to make whatever profit possible out of the account owner. Now that the Fed's proposed regulation requires giving a customer more time to cover bills, companies chose to cut off the customer as a higher credit risk and less profit.

We only guess at the reason being the Fed's new regulatory proposal, though it is more than likely to be truth.

The indubitable ground for credit card companies to close your inactive card is a rush to profit and fear to lose it. If you do not use your credit card, how would all those credit card rates, fees and a whole lot of other charges bring profit to banks?

Even if your account is in good standing and you have been loyal to your company for many years, your card may be closed. It might be rather distressing to lose enviable credit rewards and beneficial rates offered by your plastic, but just simply holding a card and not using it may cost your company money.

A distress may turn into deep frustration as you find out that your good credit got damaged because of the closure. That is too much, you might think. But before you do, ask yourself if you realize what a debt-to-available-credit ratio means.

To put it simple, when a credit card is closed, your available limit drops while your balances on other cards stay the same. So, the credit utilization rate is high, which is rather unfavorable for your credit score.

A drop in credit cores may also be caused by the fact of the closure itself, which shows you as a bad credit risk for other potential lenders. If your account was closed by your card issuer, it is logical to assume that you might be a completely irresponsible delinquent cardholder.

The only way to prevent this from happening to you is to use your credit card at least few times in a year. While the card purchases will not hurt you (considering that you pay balances in full), it will still bring at least some small profit to your bank.

Just occasional credit card transactions will rid your company from the incentive to cut off your account.

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  • Larry
    With the Virgin / Barclaycard signature offer, there seems to be some consumer deception or maybe even outright fraud goin on.   I decided to jump on this offer..  read all the info on it..  was approved for their platinum card, paid the fee, then was only awarded 10,000 points instead of the advertised 20,000.   When i inquired about the less than advertised bonus points, Barclaycard claims only Signiture Visa cardmembers get the 20,000..  as a platinum cardholder, you don't qualify for that level of bonus, so you get 10k instead.   Well, in their current ongoing promotions, it states plain as day that....    Applicants approved for the Visa Signature or Platinum Card with $49 annual fee will receive 20,000 Bonus Points awarded to your Virgin America Rewards Account at the close of the first billing statement in which you make your first purchase or balance transfer (that is not returned or rescinded) and have paid the Annual Fee on the account (and such fee is not rescinded). They don't mention anything about a separate program for platinum cardholders..  However, trying to get someone to resolve this issue with either Virgin or Barclaycard seems to be rather impossible.. Seems to me they're simply drawing people in with the fraudulent offer, then simply saying, oh, we're sorry you don't qualify..  but thanks for signing up for our garbage credit card with insane fees..   
  • CreditLandCom
    Thank you for sharing your experience with us. We have reviewed this offer and you are correct, nowhere it is mentioned that 20,000 Bonus can become a 10,000 Bonus all of a sudden... We will mention this in our review of this card so others can make an informed decision. Another way to get Virgin miles is to get an American Express charge card: The Business Gold Rewards Card® now offers 50,000 Miles, though you do have to spend $5,000 in the first three months of card membership to get it. It also has $0 introductory annual fee for the first year, then $175. http://www.credit-land.com/details/the-business-gold-rewards-card-from-american-express-open.php Premier Rewards Gold Card now offers 25,000 Miles, though you do have to spend $2,000 during your first three months of Card membership. It also has annual fee of $0 for the first year, then $175. http://www.credit-land.com/details/american-express-premier-rewards-gold-card.php While we do not know If any of these offers make sense to you, we are at least sure that you will get advertised bonus in full if you decide to get them... Conversion rates for Virgin America are: 100 Elevate Points = 200 Membership Rewards® Points All the best.
  • Deborah Ellsworth
     would very much like to start a new credit history  by making payments on time I would tohave a credit card that is NOT PREPAYID! I don't need a card with a high limit just something to start a new credit history. Thank You Deborah Ellsworth
  • Deborah Ellsworth
    I would very much like to start a new credit line to get back on track. I DO NOT WANT A PREPAID CARD!! This new credit card if I am approved does not have to hace a high limit just something for me to start over again and prove myself ThankYou. D Ellsworth
  • Miss Edna
    there is a huge problem with the RFIP chip: it is easily compromised. There are already 'readers' in the form of what looks like a cellphone in a case, that scans all the info in the chip by merely walking near a person -- this 'reader' penetrates leather, cloth, spandex, etc. The only thing it will NOT penetrate is METAL. Perhaps one has seen commercials touting metal credit card cases. Here is my hint for a free fix: cut a piece of aluminum foil or use the foil that is used to keep foods fresh, like coffee. Cut it so that when folded once, it forms a sleeve for your credit card. place the credit card in the sleeve, then place the sleeve in your wallet.
  • Robin Parks
    I am looking to apply for the AARP Visa signature card from Chase that offers $100 after spend $500 in first 3 months, no annual fee and 0% interest first year; I don't want to mail in offer because of having to write in Social security #. Can you direct me to the proper on-line site?
  • CreditLandCom
    The Chase bank cards are not currently available at Credit-Land.com, but you can consider applying for the Citi® Dividend Platinum Select® Visa® Card - $100 Cash Back. The cards has similar terms and cash back program.
  • Becky
    This is Becky Now what do I do just waqit for acard to come to me?
  • CreditLandCom
    Once you have applied, you should receive a letter within 10 business days letting you know if you were approved and when your card will arrive. If you did not receive any letter or notification from the issuer, you should contact them directly. Also, you should contact the issuer if you’ve been waiting for your credit card longer than 30 days. Since we are not a bank and don’t issue credit cards, we cannot give you any information about your application or credit card.
  • SavingStar
    Thank you for posting about SavingStar. Just to clarify one sentence in your article, we have over 5 million members (not 500). Thanks, Josh
  • CreditLandCom
    Sorry for the misprint. We’ve corrected the sentence. Thank you for noticing that.
  • Eric
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