How to Avoid Getting Your Credit Card Cancelled

Posted on November 23, 2012 by

Did you know that your credit card can be cancelled at any time on short notice or even no notice? Worst of all, this could happen in the worst possible time, like when you’re not carrying any cash and about to pay for something. To prevent this from happening, here are several tips on how to avoid getting your credit card cancelled.

Tip #1: Pay your credit card on time

To a credit card company, one of the biggest transgressions you could ever commit is to not pay your credit card on time—it’s almost equivalent to not paying them at all since you’ve already skipped your due date. To avoid this, you should pay your credit card bill before it becomes due.

To make sure you pay on time, set up an automatic bills payment in one of your bank accounts. When the due date rolls by, the service would automatically deduct the amount. You won’t even have to remember when this happens! Of course, you still have to make sure that the account has enough funds or you’ll get penalised with a fee.

Tip #2: Take care of your credit score

Fact: if your credit score plunges for some reason, your credit card might get cancelled. If you want to keep using your credit card, you need to take care of your credit score as well. You should already know the drill by now:

  • Don't miss your payments--this would hurt your credit score.
  • Go easy on your card applications; each lowers your score by a few points.
  • Don't max out your credit cards. If your limit is dangerously close, your score would go down.
  • Review your credit report regularly, correct any problems and settle any hidden debts if there are any.

Tip #3: Keep your credit utilisation low

Your credit utilisation ratio refers to the amount of debt you have versus your available credit. To keep your card from getting cancelled, make sure that your credit utilisation ratio is low. For instance, if your credit limit is $25,000 and your outstanding balance is $8,400, your credit utilisation ratio would be 33.6 per cent, which isn’t bad per se but it could be better.

You should aim for a credit utilisation of around 25 per cent or below. If your ratio balloons, your credit card issuer might cancel the card to prevent your debt from getting out of hand. Oddly, getting the credit card cancelled actually increases your credit utilisation ratio.

Tip #4: Use it or lose it

Of all the possible reasons your credit card company may have to cancel your credit card, non-use is the easiest to prevent. All you have to do is charge something to your credit card. Yes, financial gurus encourage you leave your credit card home, but to keep it functioning, you’ll have to use it too. The trick here is to make small purchases and settle it in full immediately to avoid the interest.

Many credit card issuers have a 60-day policy regarding non-use although this could vary. If you really don’t want to use your card, you can call the credit card company; but since many of them use automated systems, you still might get your card cancelled anyway. Occasional use is still the better option here.

Related Articles: