Tuesday, May 13, 2003

Can a Credit Card Close My Account for Lack of or Non-Use With a Balance?

Although credit card companies are generally interested in providing more lines of credit to more people, most have the legal right to close a line of credit at any time. A company may do this for many reasons, such as if you fail to use your card frequently enough or at all. The company can close an account whether there is a balance on it or not. If a balance does exist, you still have to pay it.

Credit Cards

    A credit card allows a person access to a credit line that is controlled by the company that issued the individual the credit card. Credit cards differ from checking accounts in that the financial institution is not holding any funds provided by the account holder. Instead, it is essentially issuing a series of loans. This arrangement provides it with more flexibility with regard to whether it can close the account.

Contract Terms

    The issuance of a line of credit to an individual is expressed legally in a contract that the credit card holder must sign before he can use the card. This contract spells out the terms of the card, including the credit card company's rights with regard to the line of credit. Most contracts allow the company to close the account at any time, for any reason.

Closing Accounts

    A credit card company does not need to provide a reason for closing an account. So long as the contract includes language that allows the company to close the account when it wishes and does not mandate that it provide loans to the account holder, it is perfectly legal for the company to close the account. Accounts are often closed for non-use.

Balance

    An account can be closed even if a person has an outstanding balance. In such a case, the person still must pay back the money that he borrowed from the finance company. In addition, the company can still charge the person interest and penalties. The only real change is that the person cannot draw money against the line of credit anymore.

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