Your Credit Card was Just Canceled. Now What?

9 years ago

At first she thought the problem was that pesky magnetic stripe. She knew she had plenty of credit available on her card, she always paid her bills on time, and she usually paid more than the minimum payment due.

When that card didn't work, Jennifer* simply used her other card. No worries. The second time it happened she went online to double check her card balance. The online statement showed when Jennifer had made her last payment,and it indicated her card was not only active but there was plenty of available credit.

So Jennifer tried using the card again. Declined.It wasn't until two days later - two days after Jennifer had found herself in embarrassing situations that she received the letter from CHASE saying they had canceled her credit.

Jennifer is one of thousands of credit card holders who probably have very similar stories. That's because CHASE canceled their credit,and then sent out the letters--potentially leaving people on vacation, out of the country,in an emergency room-- in a very awkward, not to mention humiliating position.

Only customers who had inactive accounts received letters in advance of the pending cancellation.Consumeraffairs.com has a post dedicated to all the Jennifers out there who are suddenly finding themselves without credit cards thanks to CHASE's purging. Many believe that the majority of cancelled customers are those that came under CHASE's auspicies after it bought Washington Mutual last year.

The Reasons they gave me were based on my credit report from Experian. These were the following reasons: Time since last past due is too short. Total available credit on bankcards is too low. Average length of time since bankcard(s) opening is too short.

They tried to explain what those meant but I was still confused. They were the lamest reasons.

Now that CHASE canceled her card, Jennifer has a total of $300 available credit on her other card. She is frantic that she will get a letter from that credit card provider saying her only remaining card has been canceled.

A life without a credit card is simply unfathomable for most Americans.It is also inconvenient. There are busiensses..particularly hotels and car rentals that make it very difficult to do business without a credit card.

In a week or so, Jennifer has to get in her car and take her son to college. She had planned on using her now canceled credit card for gas, hotel, and to buy all the stuff you have to buy a freshman in college. Jennifer hasn't gotten around to figuring out just how she is going to pay for the trip and those college expenses. She just received the credit card cancellation this week.

For the past 30 years many consumers didn't worry whether or not they could afford to take that trip or make those purchases because they could buy it on credit. The beneficiaries of this buy now, pay never mentality were businesses which were able to grow faster because people were spending money they really didn't have.

While most businesses benefited from our debt-culture mentality, few benefited as much as the credit card industry itself. And so ,for many,it feels like the credit card industry is punishing people for their own bad decisions. It's like going cold turkey when you are trying to quit cigarettes -- a shock to the system and months of being crabbier than hell.

With so many people losing their credit cards, it's going to be even more difficult for some businesses to survive. That's not to say that living on credit is smart, it's just that trying to stop living on credit when that is all you've done for years will take some adjusting to.

The lackof credit cards is one reason many businesses are promoting layaway,but in the travel industry it is very difficult the get a hotel room or rent a car unless you have a credit card.

While it is possible to pay for a hotel room using a bank debit card, they don't make it easy and they often put a hold on a significant amount of money -- a hold that can last several days after you check out.

Such holds can remain for several days to more than a week after you check out. They can get you in trouble when you try to make a purchase with your debit card and it's refused. Or, if you have overdraft protection, you're charged hefty overdraft fees for purchases you thought you had money in your account to cover.

One option is to pay for rooms and cars in advance. This is typically how purchases are made on discount travel sites like Priceline and Hotwire. When you get your car or check into your hotel you will still need to give them a debit card which they will then put a hold on the funds in your checking account to cover incidentals but by paying in advance you will have less money "on hold" during your trip.

Less than a year ago, Southwest Airlines announced it was going to stop accepting cash  for in-flight drinks. The announcement was made September 3, 2008- just weeks before many of us learned our economy was actually a house of cards. In that announcement Scott Halfmann, a Southwest Airlines vice president explained,

For years, customers have been asking Southwest to accept credit cards for onboard payment, and now we can give our customers one more feature they want.” 

Passengers will continue to receive offers of peanuts, snacks, juices and sodas at no cost. “The only difference our customers will see is a convenient way to pay for alcoholic beverages and Monster energy drinks, and no more in-flight announcements asking who has change for a $20 bill!,” Halfmann added.

Many of us remember that getting Traveler's Checques was part of the preparation for any business trip or vacation. In 2007, American Express discontinued its Traveler's Checkque cards and if people are still using Traveler's Checques it's no one I know. However, maybe what's old is new again and having some traveler's checques may not be such an odd idea, particularly if you are concerned that your credit card company may cut you off when you least expect it.

I can give you one reason to use them: if you only have one card, if you are traveling alone, if you are traveling in remote areas. If some or all of these apply think on this. The reality for most card issuers is not like the old ads - they will not be rushing you a new card within 24 hours. If you lose your card, have it stolen, the mag stripe and or pin packs in, then you have a problem if this is your only means of payment and getting cash. Your card could also get skimmed (ie cloned) and then maxed out. If any of these things happen you possibly have a huge problem.

While Jennifer is devastated to lose her credit card and she is not in a financial position to take along Traveler's Cheques, she is still an optimist. She is grateful it happened this week and not when she was on the road taking her son to college. That she says, would have been a disaster. Even though Jennifer escaped that landmine, thousands of others probably did not and that's what makes the CHASE cancellation policy so distasteful. They blindsighted their customers -customers who from the blog posts paid their bills and often paid more than the minimum amount due.

Those customers deserved better. It's not as if CHASE hasn't been making money on them, they have. It's one thing to change the term,charge higher interest, even reduce the credit limit but give people a heads up - it's the only ethical thing to do. *Jennifer is a pseudonym because she doesn't want her children to know how severe their financial situation is.

Elana writes about business culture at FunnyBusiness

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