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Cancelled Credit Cards

The Primary Reasons Banks Choose To Cancel Credit Accounts

Some HELPS clients wish to retain an existing credit card, usually one with a smaller balance. However, major banks often back many different credit cards. A bank backing a credit card that a client isn’t paying will most likely cut off all the credit cards affiliated with that bank, regardless if the client is still paying one of them. Typically, though, cards that aren’t affiliated with a bank that’s also backing an unpaid card will remain viable, even if the client isn’t paying other bills. This is normally the case, but isn’t always the case. Occasionally, HELPS clients report that a credit card they are currently paying is cancelled anyway.

These are the three main reasons a card could be cancelled:

  1. Payments on the card are not made.
  2. The credit card is not used (this is the most common scenario for HELPS clients).
  3. The credit card company or bank checks a credit rating and sees other problems.

There are several reasons a bank might check the credit rating of customers even though they’re current on their card payments. This inquiry is called a “soft inquiry” and doesn’t affect a person’s credit; it merely allows the credit card company to see if other debts are not being paid. (In contrast, a “hard inquiry” occurs when you apply for credit and the financial institution checks your credit; this shows up on your credit report, and too many can negatively affect your credit.) There are no published “rules” about when a credit card company would make a soft inquiry; commonly it’s to find out if a client qualifies for a new offer. However, some actions on the cardholder’s part might lead to one – including making a late payment, not using the credit card, or dramatically increasing the balance owed on the card. Any of these could trigger a soft inquiry, which would then reveal that the credit card holder was not paying other debt. This could, in turn, lead to a credit card being cut off even though it is current.

Some banks are more aggressive than others about checking the credit of existing customers. For example, Synchrony Bank seems to be one of those banks. You can read here about cancellations of credit cards backed by Synchrony Bank even when payments are current:

HELPS rarely receives reports from existing clients who have credit cards cancelled when they’re current on payments. But it occasionally happens. Obviously, if the card is cancelled, a HELPS client can stop paying the debt and include it in the list of debts they choose not to pay. The client would simply need to provide HELPS with the information of the credit card, including address and account number. HELPS then contacts the credit card company or credit card collector and asks them to cease communication with the client and communicate with HELPS instead.

Here is an article describing when a credit card company can cancel a card that is otherwise current:

Here is an article that describes the difference between a hard and soft inquiry:

Eric Olsen, Executive Director HELPS nonprofit law firm.

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