I sat in a restaurant one evening with my wife and a friend from out of town, He had offered to take us to dinner – to a very upscale restaurant at that. The bill came, he plunked down his credit card and a few minutes later heard the dreaded five words, “your credit card was declined”. I’m sure that he was just horribly embarrassed.
In the event this happens to you, here are six things to consider.
The statements will just keep coming
Be forewarned that your credit card may now be worth nothing but your credit card statements will keep arriving. However, there are some consumer protections. This includes the Credit Card Accountability Responsibility and Disclosure Act that requires the credit card companies to treat you respectfully despite the fact that you may not be one of their favorite people anymore.
It can’t demand immediate payment
One piece of kind of good news is that the credit card issuer cannot demand that you immediately pay your balance due. The federal law mandates several options. For example, the company could double the minimum payments you’ve been making or require you to pay off your balance in five years, whichever will require less time. Be aware that you will need to get your payments made on time regardless of which choice your credit card company makes. This is because your credit score will depend on it.
You will still be charged interest
While your card may be gone, the interest lingers on. Your credit card issuer can still charge you interest on your balance. However, according to federal law, it can’t increase your interest rate when you are paying off your balance. However, if the card has a variable interest rate, it could raise your APR.
They have to tell you why
The law also mandates that if the fault was yours, the credit card company is required to inform you why you were cut off. For example, if it didn’t like the way you‘ve been using credit –you been making late payments, your credit score has dropped, etc. – it must tell you this. In the event it cut you off because of your credit score, it must also tell you the score that led to the decision. Other reasons why the credit card company voided your card could have nothing to do with your credit. It could decide to cut you off if you weren’t using the card enough or weren’t using it at all. Or it could be because the card issuer has eliminated your kind of card.
Your credit score will be affected
If you have a big balance on that card and lose it, your credit score could be lowered. This is because almost 33% of your FICA score is based on the amount of credit you have compared with how much you use each month. This is called your “utilization ratio”. The higher that your ratio is, the worse it is for your credit score. Without getting too technical, sufficient to say that if you suddenly have less credit but the same amount of debt your ratio will go up and your score will go down.
Appeal the decision
There’s always the possibility that the credit card provider simply made the decision based on bad information. Of course, it’s also possible that it didn’t. But if you could explain the situation well enough – and convincingly enough – you might be able to get at least part of your credit line restored.
The symptom of a larger problem
If you do have a credit card declined, this may be the symptom of a bigger problem – that you’re head over heels in debt and unable to make even your minimum payments. If this is the case, you should let us turn the problem over to our debt settlement providers. The odds are that they can slash your debt by thousands of dollars and help you become debt free in 24 to 48 months. Fill out the form at the top of this page or call us today so that we can explain debt settlement and how it could help you.