Don’t get blind­sided by your credit card com­pany

It’s easy to be un­pleas­antly sur­prised by changes to your ac­count. Here’s how you can bounce back

Toronto Star - - SMART MONEY - CLAIRE TSOSIE AS­SO­CI­ATED PRESS

Aditya Dwivedula wasn’t happy when his old­est credit card got can­celled — es­pe­cially since it hap­pened with­out any warn­ing.

“I ba­si­cally got an email say­ing my card is no longer valid, es­sen­tially be­cause I hadn’t used it for two years,” says Dwivedula, of Seat­tle. Con­cerned about how the clo­sure of the 13-year-old ac­count would af­fect his credit score, he asked the card is­suer to re­con­sider. It of­fered to re­open the ac­count — but only af­ter run­ning a credit check that would likely knock a few points off his score. Re­luc­tantly, he agreed.

Get­ting no­ti­fied be­fore­hand could have helped him avoid the whole or­deal, he says.

“I ba­si­cally got an email say­ing my card is no longer valid, es­sen­tially be­cause I hadn’t used it for two years.” ADITYA DWIVEDULA CREDIT CARD USER

“I wish they had just told me ahead of time, ‘Hey, you just need to use your credit card every six months.’ ”

It’s easy to feel blind­sided when a credit card is­suer makes a change to your ac­count, such as clos­ing it, rais­ing your in­ter­est rate or re­duc­ing your credit limit. Such steps are le­gal, but may not seem fair. Here’s what you can do to bounce back. Read your terms When you ap­ply for a credit card, the terms on the ac­count aren’t etched in stone.

“In broad lay­man’s terms, that (credit card) con­tract ba­si­cally says the bank can do quite a lot of things, in­clud­ing chang­ing the con­di­tions,” if it gives proper no­tice, says Naeem Siddiqi, di­rec­tor of credit scor­ing and de­ci­sion­ing at SAS, a com­pany that pro­vides ma­jor banks an­a­lyt­ics soft­ware for mak­ing credit de­ci­sions.

Gen­er­ally, is­suers must no­tify you about sig­nif­i­cant changes to your ac­count 45 days in ad­vance. But you might not get a heads-up if:

You al­ready agreed to cer­tain changes.

You’re be­hind on pay­ments or haven’t used your ac­count for sev­eral months.

Is­suers also are gen­er­ally re­quired to pro­vide rea­sons for neg­a­tive changes, if those changes af­fect only some of its ac­counts, not all. If you don’t un­der­stand why your is­suer is mod­i­fy­ing your ac­count, call and ask. Weigh your op­tions Depend­ing on the cir­cum­stances, you might be able to get an un­favourable ac­count al­ter­ation re­versed.

“In­di­vid­ual changes (to ac­counts) can al­ways be made,” Siddiqi says. With de­ci­sion-mak­ing soft­ware, he says, is­suers au­to­mat­i­cally ap­ply changes to all ac­counts that fit cer­tain cri­te­ria. But you can call your is­suer and ask to have the de­ci­sion over­turned, he says. For ex­am­ple, if you have other ac­counts in good stand­ing with an is­suer, it might let you re­open an in­ac­tive ac­count, he says.

Even when granted, re­ver­sals aren’t al­ways as sim­ple as choos­ing “undo” from a menu. You might have to pay a fee to re­in­state lost re­wards. Or the re­ver­sal could trig­ger a new credit check, as was the case for Dwivedula.

If your is­suer gives you 45 days no­tice about a change, you might be able to re­ject the change. If you do, your is­suer may close your ac­count. But un­der fed­eral law, you can still pay down your bal­ance over time with­out sud­denly in­creased in­ter­est rates or other penal­ties. Con­trol what you can If you don’t want to close your ac­count and can’t get the de­ci­sion re­versed, you might be stuck with an un­pleas­ant change.

Take th­ese steps to min­i­mize the im­pact of that change and pre­vent fu­ture sur­prises:

Keep your ac­counts ac­tive. If you’re keen on keep­ing a cer­tain ac­count open, use that card to make pur­chases every few months.

Ad­just your spend­ing. If one is­suer low­ers your limit or closes your ac­count, re­duce the out­stand­ing bal­ances on your re­main­ing cards. It’s bet­ter for your credit score to use as small a per­cent­age of your avail­able credit as pos­si­ble.

Pay in full and on time. An in­crease to the in­ter­est rate or late fee won’t mat­ter if you never pay late or carry debt.

DREAM­STIME

Pay in full and on time. An in­crease to the in­ter­est rate or late fee won’t mat­ter if you never pay late or carry debt.

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