Can a Credit Card Company Close My Account?
When a credit card company issues a card to a consumer, it is essentially providing a line of credit the person can use to take out loans. When a person takes out a loan on this line of credit, he must repay the amount borrowed according to the terms stated in the loan contract he signed when he applied for the card. Under a number of circumstances, including default, a credit card company can close the account.
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Credit Card Contracts
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All credit cards are issued according to the terms of a contract written by the credit card company and signed by the cardholder. These contracts outline the interest rates and repayment schedule of the card, as well as the rights the card company retains in issuing the card. For example, most card companies retain the right to close the account when they see fit.
Closing Accounts
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When a credit card company closes an account, it is essentially forbidding the cardholder from drawing any more money against the line of credit. Withdrawing money from this line of credit is not a right the person is guaranteed by law. Generally, these lines of credit are provided at will; the credit card company can close them whenever it chooses to, without explanation.
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Debt Obligations
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If a credit card account is closed, the cardholder is still legally required to pay back the loans he has taken out. Closing an account does not mean outstanding debts are forgiven. It simply means the person cannot charge any additional purchases against the line of credit. He must still pay back the debts he owes, in addition to all applicable interest rates and penalties.
Considerations
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Although a credit card company technically may be allowed to close the account whenever it deems necessary, most companies will choose to lay out specific situations in which they will close the account, such as a default on a loan. Theoretically, a company could be forbidden by a credit card contract from closing the account, meaning it would legally be required to continue to extend the cardholder credit. However, such contracts are exceedingly rare.
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