Another Reason To Shop Around For The Best Card

It always bugged me the way employer’s in this country have an expectation that you should give them two weeks notice before resigning.   Certainly, very few employers will give you much notice before laying you off or firing you.     I have been laid off with less than a week’s notice, right before Christmas.   Furthermore, the “two weeks notice” custom is never much of an issue when they are hiring you in a pinch and they ask you if you can start as soon as possible.

Fortunately or unfortunately, there is no such concept in the world of credit cards.     You can you cancel your credit card at any time, for any reason, and no one will give you a hard time.    Likewise, your credit card company can cancel you with no notice as well.

What It Looks Like To Be Canceled

You never hear from people who complain that they were sitting at home one day, when they got a letter in the mail saying that their credit card company canceled them.    People usually find these things out, to their embarrassment, when they attempt to make a purchase.   That makes sense when you consider that most credit card users are likely to use their card frequently, if not daily.     Even more common are the stories that you hear about your card being canceled while out of town.

Today in The Consumerist, we are treated to this story, about someone who had several Chase credit cards canceled at once.    It goes without saying that the cards were canceled without any notice.    From the bank’s standpoint, what would be the point of giving notice?    They are canceling you because they no longer wish to incur the risk that you will default on your payments.    Giving you the opportunity to rack up more debt would defeat that purpose.  Fortunately for Joey, the subject of the article, he was not traveling out of town when he got cut off.

Consumerist Draws The Wrong Conclusion

The advice from The Consumerist is merely to fight back with a “polite, professional, and firm” letter.    I disagree.     Chase dumped you, and there is no reason to try and go crying back to them.   Move on, but learn some lessons from this experience.

Lesson One: You Can Lose Access To Your Cards For Any Reason

Yes, your credit card company can cancel you, but there are several other ways that your credit card can be invalidated.   You can lose your card, or just have another card on your account lost.    When that happens, some banks actually have to cancel all of the cards on that account.   I am looking at you Capitol One.   Sometimes, your magnetic strip dies, and your card is next to useless.   Sure, the clerk at the store could enter your numbers in, but I have found that many cashiers are too laze, and will just tell you to use another card.  You could also have your credit card number compromised by fraud.   Finally, American Express can just cut you off one day for their Financial Review.

Lesson Two: Diversify Your Holdings

In a world where your credit card company can instantly cancel you at any time, for any reason, there is no reason to have 4 of your 5 credit cards with one company.   I  depend on my credit cards as my primary method of payment.   I don’t carry cash or checks, and I rarely use my ATM card.    In order to ensure that I am not “cut off”, I always carry an American Express and at least one Visa or MasterCard.   If I have additional cards, I leave one at home, in case my wallet is lost or stolen.   If any company decides to cut me off for no reason, I can instantly whip out a different card and go about my business.

Lesson Three: Do Not Stockpile Rewards

One of the problems Joey had with his Chase cards being canceled was that he was forfeiting part of his rewards.    This is a major problem I have with  some reward programs that essentially hold your reward in trust.   Your reward may be available at a certain time of the year, like the Costco Amex.    See pitfalls here. In other instances, your reward may be available only when your account is in good standing, like in this example.   In Joey’s case, the rewards apparently were dispersed only when they reached a certain threshold.   I have set my Capitol One to disperse at the minimum threshold of $25.   With my Starwood Amex, I get StarPoints deposited into my account with Starwood Hotels once a month on the day that my statement closes.     In theory, the points are mine to keep even if I never pay my credit card bill.

Lesson Four: Another Good Reason Not To Carry A Balance

There are a million good reasons to use credit cards as a method of payment, and not a method of finance.    The key is to always pay every bill on time and in full; never carry a balance.    Now, there is a million and one reasons as you can easily move from one credit card to another when you don’t have your money tied up in any card for any time longer than your next due date.