Do Credit Card Issuers Have to Tell You When They Close Your Account?

No matter what you're buying, having your credit card declined at checkout can make your stomach sink. Immediately, you go over all the potential issues. Maybe the card reader malfunctioned. Maybe the internet is down. Maybe your last payment didn't go through.

But there’s another possibility—maybe your account was closed by the issuer and nobody told you.

Yes, as frustrating as it may be and as bad as it feels, it happens to people all the time. That’s because credit card issuers generally don't have to tell you if they close your account.

Issuers Can Cancel Your Card Any Time Without Notice

You have the right to cancel your credit cards any time, for any reason. Likewise, the credit card issuer is allowed to cancel your credit cards any time, and for pretty much any reason.

Card issuers don't have to warn you before they close your account. Most of the time, the issuer doesn't need to notify you after they close your account, either. The main exception is when the closure is considered an adverse action, which essentially means the issuer closed your account because of something in your credit report. In this case, the issuer sends an adverse action notice within 30 days of the account closure.

Five Common Reasons Issuers Cancel Credit Cards

Issuers close credit card accounts for a few reasons, but it mostly boils down to profit and risk. If you cost the issuer money, and/or the issuer thinks you represent more risk than they’re willing to take, it may cut its losses and close your account.

Let's take a look at some of the most common reasons.

1. You don't use the card enough

Inactivity is arguably the most common reason an issuer closes an account. Each open account costs issuers money to maintain, so if the credit card isn't making any profit, it's not worth the cost of operation.

Credit cards with annual fees are the least likely to be canceled for inactivity, since the issuer gets back its operating costs via the annual fee. However, even those cards could be canceled if you go years without using them.

2. You've stopped making payments or maxed out the card

A maxed-out credit card can have a few negative side effects, including damage to your credit score. It may also be the reason your credit card issuer decreases your credit limit or closes your account entirely.

Similarly, if you've stopped making payments, the card issuer is very likely to close your account. In general, six months of nonpayment could get your credit card account permanently closed and sent to collections.

3. Your credit profile changed

Many credit card issuers periodically check up on cardholders' credit profiles to look for any changes that might be a red flag. These changes could have nothing to do with your account with that issuer.

Here are some examples of what an issuer might consider a red flag:

• Missed payments. Any payment more than 30 days past due gets reported to the credit bureau. This could spook an issuer, even if the late payment is on an account with a different creditor.

• High credit utilization. Your credit utilization is how much of your available credit limit you're using. A card with high utilization, especially when the balance is carried for several months, could concern your issuers, even if it's a card from a different issuer.

• Lots of new credit accounts. Suddenly opening multiple credit accounts could signal to issuers that you plan to take on a lot of new debt.

• Default, bankruptcy, or foreclosure. These could be signs that you're in financial trouble, which would definitely worry an issuer, and could lead them to close an account.

4. The issuer thinks you've breached the card terms

All that paperwork that came in the mail with your new card lays out the terms and conditions you agreed to when you opened the account. If the issuer believes you've broken those terms, it can (and likely will) close your account.

One common example is when people abuse credit card rewards programs. Churning, for example, is when someone opens and closes cards for welcome bonuses but not for regular use. Some people manufacture spending for extra rewards (such as buying gift cards or other cash equivalents).

On the more nefarious side, this could also cover fraud or identity theft.

5. The product isn't being offered anymore

An issuer's credit card lineup isn't static; it changes all the time, with cards getting updated or replaced every few years. Sometimes, issuers get rid of unprofitable or unpopular card products entirely.

If an issuer is getting rid of a specific kind of credit card, it may switch you to another one of their credit cards, or it may close your account altogether. In most cases, however, you would be notified about this type of account change or closure.

What to Do Next

If you feel your account was closed in error, contact the issuer to appeal the closure. Otherwise (or if the issuer says no), what to do depends on a few things:

• If you have a balance, pay it off. Interest can still accrue on a balance even if the account is closed.

• If you have rewards, use them up. Many issuers consider your rewards forfeit when they close your account, but others may give you a few weeks to use any remaining rewards.

If the account was closed due to adverse action, check your credit reports so you can find the problem and fix it. 

If none of the above apply, then—as annoying as a card closure is—it’s probably best to simply move on.