I received a letter from my credit card issuer today stating that since I had not used my card for “an extended period of time” that they permanently closed my account. My goal in not using my cards was to improve my credit score. My question is since the issuer was the one that closed the account, will it reflect negatively on my credit report?
-Lori, New Jersey
It seems logical right? Don’t use your card, you won’t have a balance and you won’t have to worry about paying it off. Unfortunately however, that’s not the case. “Card issuers have been closing out millions of inactive accounts…they are doing this in order to limit their risk as they are facing mounting losses related to card members who are unable to make payments on their credit cards,” says CardRatings.com’s Curtis Arnold.
If you don’t use your credit card over about a six-month period, it may be considered inactive and your issuer may cancel your account. Unfortunately, this will impact your credit score. “Closing out an account that you haven’t used in a while on the surface may seem like a prudent thing to do, but doing so will likely adversely affect your credit score,” says Arnold.
The decreasing of your score has to do with a little something called your utilization ratio. More…
More and more Americans are being hit with increased credit card rates. What’s the best way to cope? Watch the video below to find out.
QUESTION: This morning on your segment, you said we as consumers can opt out of any new interest rate set by the credit card companies as long as we close the account and simply pay off the balance. This theory is correct on four out of five accounts of mine. One company told me there was no opt out options and I would HAVE to pay their new, higher percentage rate. Is this illegal on their part? What can I do?
-Brad, South Dakota
ANSWER: Thanks to new credit card reform laws, it’s becoming easier to opt out when you’re hit with a higher interest rate. However, the date in which the notice reflecting your change in terms was mailed will affect whether or not you’re able to opt out of the new interest rate you’re asking about.
If your notice was mailed before August 20th, 2009, then you may be out of luck. This is due to the fact that the portion of the Credit CARD Act of 2009 that outlined the rules for disclosure of contractual changes went into effect on that day. As the law stands now, your credit card company must give you at least 45 days notice in advance of any interest rate hikes. This wasn’t always so. More…
Interest rate hikes, increases in annual fees and higher balance transfer fees are just a few of the changes taking place in the world of credit cards. How can you protect yourself? Watch the video below to find out.
I have heard you mention credit counseling through the NFCC. There is an agency in my hometown. Can you tell me what kind of help they can give my husband and me? We have a large amount of credit card debt as well as equity line debt. We are paying our bills on time but can only pay minimums. Do they negotiate with the credit card companies on our behalf?
-Lisa, Alabama
Every year the NFCC assists over 3.2 million people who are struggling with their finances. For over 50 years, NFCC member agencies have offered free or low cost services (whether or not you’ll be charged for the help they provide depends on the member agency and the laws in your state) to those wanting to take control of their debt. The NFCC offers confidential help via phone (through their national toll-free hotline), online or in person.
Through credit counseling, the NFCC can help you to work towards paying more than the minimum amount on your bills. During a session, your counselor will address your credit issues and help you find ways to work towards solutions. “Adjusting the budget, decreasing spending and increasing income would be ways to find extra money to pay more than the minimum and get out of deep incredibly sooner,” says the NFCC’s Vice President of Communications Gail Cunningham.
If you’d like the NFCC to negotiate with creditors on your behalf, they can do that through a Debt Management Plan, or it’s commonly known, a DMP. A DMP is essentially a plan to help More…
