Has Your Credit Card Been Cancelled? Don’t Panic

Updated on: 04 Jan 2024 // 3 min read // Credit Cards
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Credit Cards come with an expiry date. Hence, we presume that they will be active until that date at least. However, there are times when the Credit Card provider can cancel the card. You might be in the midst of paying for something when you get the shock that the bank has declined your payment.

Is there something you can do? Let us look at the reasons for the cancellation of the card. Follow these tips to get out of the situation without panicking.

1. Contact the Credit Card provider

Remember, the Credit Card provider can cancel your credit limit at any time without informing you. Before taking any drastic action, you should be aware of the reasons for cancellation of the card. It could be a simple error on the part of the Credit Card provider. It could also be because of non-usage of the Credit Card for a long period of time. Instead of speculating, it is advisable to contact the card provider and understand the reasons for cancellation.

2. Inactivity can be a reason

You might have credit limit available on your card. However, you might not have used the card for more than a year. Credit Card providers earn their income in two ways:

  • Interest payments
  • Transaction fees paid by the merchant

In case of inactivity of the card for an extended period, the card provider does not earn any income. Hence, it is a valid reason for the card provider to cancel the card. But, can they do so without notifying the cardholder? Logically speaking, they should not. However, the law does not stipulate that. Banks are within their rights to cancel a Credit Card due to inactivity without informing the cardholder.

3. Fraud

Credit Card companies monitor the transactions on the card on a regular basis. If they notice any fraudulent activities taking place on any card, they can cancel the card. However, in this case, they have to inform the cardholder to confirm whether the transactions are genuine. They cannot take any action unilaterally under such circumstances. It can be an honest mistake on the part of the bank or the Credit Card provider. Give them a call and sort out the matter. Unblocking the card can make it active again. Alternatively, the Credit Card provider can issue a new card.

4. Changes to your credit score can result in the blocking of the card

As part of the annual reviewing exercise, Credit Card issuers can check out your credit score. In case they find a drastic reduction in the ratings, they can cancel the card limit. The best way out of such a situation is to check your credit score and ascertain the reason for the decline in your credit score. There can be inaccuracies in your credit score. Investigate and rectify them as soon as possible.

How will the blocking of the card affect your finances?

  • It provides you with less access to finance.
  • It affects your credit score. The credit utilization ratio (CUR) comes down drastically. Imagine you have a credit limit of 50,000. Your utilization is around 15,000. It amounts to 30% of the limit. It is an acceptable CUR. Suddenly you find the cancellation of a credit card limit of 20,000. Now, you end up with a CUR of 50%. The high CUR can affect your credit score and bring it down.
  • In case the canceled credit belongs to one of your older accounts, the average age of your active accounts comes down. It affects your credit history.
  • In case you had only one card, the cancellation of the card affects the balance between the unsecured and secured debt.
  • You will lose the accumulated reward points on the card.

Is there an alternative?

Contacting the Credit Card provider and requesting them to reinstate the credit limit is one solution. In case they do not agree, you have no other option but to search for better Credit Card Offers Online. If there are balances to be paid, you can opt for a new Credit Card that comes with a 0% APR (annual percentage rate) option.

How can you avoid such an occurrence in the future?

Treat the cancellation of the Credit Card as a lesson. The best way to avoid such an occurrence in the future is to use it consistently. Pay your bills on time and maintain the CUR. Panicking is not going to solve the issue.

Also Read: Tips to Protect Yourself from Credit Card Fraud

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