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Alarming New Developments Concerning Credit Card Companies Canceling Credit Card Accounts

  • By: Christopher Benson
  • Published: June 23, 2010

If you have a credit card at a bank where you also have a checking account, you need to be aware of the following important information:

The following happened to a client this week:

Client X has an excellent credit score with no late payments. Client X has a bank account with a national bank.  Client X also has a credit card with the national bank.

Client X has had the credit card and the bank account with the national bank since the 1970’s. No late payments–Ever.

A couple of days ago, Client X called the national bank to simply “inquire” whether the interest rate on their credit card could be reduced in light of Client X’s excellent credit history and long term relationship with the bank. Client X had heard about people negotiating lower credit card interest rates and thought there would be no harm in asking.

The representative from the bank said “No.”  Client X hung up the phone and thought “Well…there’s no harm in asking.” Unfortunately, Client X was wrong. Very wrong.

The next day, Client X went online to pay some bills through their bank account.  Much to the client’s surprise, the bank had placed a “Hold” Client X’s entire checking account and terminated Client X’s credit card.

Client X thought someone had stolen their identity and possibly made some unauthorized purchases. Client X immediately contacted their bank.

The bank representative told Client X that under a new Federal Law, that if a person asks a bank to change their interest rate, the bank can consider the person “a credit risk” and terminate the person’s credit cards and freeze the person’s bank account.

Client X was shocked. So, client X went to the local branch of the national bank to find out what was going on.

After 3 1/2 hours at the local bank branch, client X was able to get the “freeze” on their checking account removed; however, the bank stood by its decision to cancel the client’s credit card — despite Client X having the credit card account since the 1970’s— simply because the client asked the bank to reduce the interest rate on their credit card.

Client X then went to another bank to open a new checking account.  The new bank gladly accepted the transfer of Client X’s funds and opened a new account and credit card for Client X.  The new bank verified that the new Federal Law existed and that credit card companies (and banks) can cancel a person’s credit card account by a person simply asking the credit card company to reduce the interest rate for the credit card.

We are in the process of researching the new law and when we find it, we will post it on the website.

In the meantime, be aware that if you ask your credit card company to reduce your interest rate, the same thing may happen to you.

Christopher Benson

About the Author Chris served on the Board of Directors for Habitat for Humanity
Seattle/S. King County for 10 years and served as Vice President
of the organization during part of that time. Read More