5 tips for handling a declined credit card

The next time your card is turned down in a store or restaurant, you might feel a little less embarrassed if you know these factors.

By MSN Money Partner Jun 19, 2013 2:38PM

By Dana Dratch, Bankrate.com


Bankrate.com on MSN MoneyWhat are five words you never want to hear from a waiter?


"Your credit card was declined."


Image: Credit card © Mike Kemp, Getty ImagesIt happens all the time for a variety of reasons. You may be over your credit limit. Your credit score may have dropped, or the credit card company may suspect that the card is being used fraudulently.


And it gets worse from there. That sliver of plastic in your wallet may now be worthless – at least temporarily – yet those card bills just keep coming.


But, you have rights. A slew of consumer protections, including the 4-year-old Credit Card Accountability Responsibility and Disclosure Act, require issuers to treat you with respect, even if you're not their favorite customer anymore. Here are five things to consider if your credit card has been declined.


The issuer can't demand immediate payment

Your charging privileges may be gone. But you still have time to pay off your balance.


Federal law gives the card issuer a couple of options. It can double your minimum payments or give you five years to pay off the balance, whichever will take less time, says Chi Chi Wu, staff attorney with the National Consumer Law Center. Whatever choice your issuer makes, it's important to send your payments on time. Your credit score depends on it.


Anthony Sprauve, a spokesman for myFICO.com, a division of credit-scoring firm FICO, says your credit score won't decline simply because an account has been closed. It only considers whether you're paying on time. "If you're making your payments on time, that's going to help your score," Sprauve says.

The issuer can still charge interest

Ah, the card is gone, but that annual percentage rate lives on. The issuer can continue to charge interest on the balance. However, it can't increase your interest rate while you're paying it off, Wu says.


According to the CARD Act, the issuer can raise your APR only if it's a variable-rate card, if your introductory rate has expired or if your payment is late by 60 days or more.


One way to avoid interest rate increases is to set up automatic bill payments. You can use an online calculator, such as Bankrate's credit card payoff calculator, to figure out how much you can pay every month, and then you can commit to pay that much automatically.


If it's 'your fault,' they have to tell you why

If a card company cuts you off because it doesn't like the way you've been using credit – a drop in score, late payments, etc. – it must tell you. Unfortunately, it's not required to give you advance notice. So it's entirely possible you could try to use the card and be denied before you find out you don't have a credit line anymore.


If the move was based on your credit score, the issuer must also give you the exact score or scores used in making that decision, says John Ulzheimer, president of consumer education for SmartCredit.com.


Issuers can also cut you off for reasons that aren't based on your credit, he says. If you're not using the card, or not using it enough, the issuer may think it's not worth the cost associated with keeping your account open. The issuer also may cut you off because it's eliminating your type of card or changing how it extends credit. In both cases, the issuer doesn't have to tell you that you've been cut off, Ulzheimer says.


It could lower your score

Theoretically, if you carry a balance, losing a large credit line on a credit card could lower your score. The reason: Almost a third of your FICO score looks at how much credit you have compared with how much you use each month; in credit-speak, this is your "utilization ratio". The higher your ratio, the worse it is for your score. So if you suddenly have less credit and the same amount of debt, your ratio goes up.


If the credit line is small, like that of many retailer cards, and you have other credit cards, it probably won't have that much of an impact, Ulzheimer says. And if it was a charge card, it may not change your score at all. That's because charge cards require the bill to be paid in full every month, and many charge cards don't report utilization ratios.


Even if the card was a credit card, the impact might not be as bad as you fear. Based on a couple of FICO studies completed in the past few years, the overall effect, on average, "ended up being relatively small – about 5%," Sprauve says.


You can appeal

It's possible the move was a mistake, based on erroneous information.


It's also possible that it's not, but you could explain the situation well enough to get all or part of your credit line restored, says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies. For example, say you normally shop at pricey department stores. But suddenly you switch to buying everything at discount stores. As a result, the issuer may conclude that you have money trouble. If you learn that's the case, it might help to notify your credit card issuer that you've simply changed your taste in stores, Jones says.


On the other hand, if your financial situation has taken a bad turn or you've been running up balances and paying minimums or paying late, "there is probably zero chance that someone is going to talk them into getting it back," he says.


More from Bankrate.com:


Jun 25, 2013 7:34AM

Folks, treat your credit cards like charge cards.  That is to say, pay the balances off each month.  Do not pay the issuers interest.  If you can't pay the balances off each month that means you can't afford to buy it. 


Credit cards do play an important role.  Many buyer protections over cash.  Paying for online purchases, booking hotels, renting cars, airline tix.  All of these will require a credit card. 


It is all about using them wisely.  If you can follow these basic principles, you will never need to worry about being suddenly cut off from your credit cards. 

Jun 22, 2013 7:25PM
I absolutely loath the carpetbagging bankers and their credit cards.
The sheeple are standing in line to get a credit card and blindly follow their leader as they topple off the cliff of financial calamity.
This country has gone to hell in a hand-basket.

Jun 25, 2013 9:35AM
Why on earth would anyone who has a credit card let their balance get so high as to max out at a resturant. Why would one not pay the damn credit card bill? Come on people this isn't like Einstein's theory of relativity here. If you can't manage your credit card you probably bounce you checks too. Companies love people like you guys. They collect billions of dollars annually from you turkeys.
Jun 25, 2013 9:31AM
I don't understand why everyone is down on the credit card companies?  They are there to make a profit like every other company.  Their interest rate, fees, and penalties are all spelled out for you in advance.  You do not have to do business with them if you don't want to.  It is not their fault if you do not know how to handle your own finances.  If you do not want to get charged fees - pay if off in full before the due date.  If you overcharge - downsize your lifestyle until you catch up.  It amazes me how many people complain about how much they owe on their credit card, yet they have a house/mortgage twice as big as they need, and a newer model car, and eat out every night, etc.
Jun 25, 2013 8:52AM

This isn't directly related, but I wanted to mention a situation I'm in.  I recently accidentally sent a monthly payment of over $7,000 to the wrong credit card company (one where I had closed the account and there was zero balance due).  I discovered it pretty quickly and sent another $7,000 to the correct card company too.  The company where I accidentally sent $7,000 (CapitalOne) says that it'll be 60 - 90 days before they bother to refund my overpayment!  Isn't that ridiculous? The Feds should shut them down immediately!  In my business, I don't even cash checks when someone overpays.  I immediately return their uncashed check to them.  It seems to me that there is no other proper way to handle it (At least for entities that have integrity).


The card was a business card. Perhaps I should charge $7,000 on my personal CapitalOne card and then tell the company it can wait 60 - 90 days before I pay it, or that they should just take what is overpaid on the business card and apply it to my personal.


I'd strongly urge anyone considering a CapitalOne credit card to look to a different credit card company. Hopefully someone that has audit authority over CapitalOne will read this posting and send a huge team of auditors theit way.

Jun 25, 2013 6:46AM
Do your self a favor, and do not have  a credit card, they are not worth having. Pay in cash and save your money up. 
Jun 24, 2013 10:54AM
If you are a business traveler DO NOT apply for the FIA AMEX (fiacardservices.com). At least 6 times a year this card is declined because of their over aggressive fraud prevention dept. Even after multiple phone calls to update my traveling profile, to remind them that I travel, yelling at supervisors, this company still doesn't get it!
They do not treat biz travelers well.
Jun 25, 2013 10:23AM
I thought this article was about how to handle the situation with the waiter as that is THE most pressing issue at that second, what to do when the waiter is in front of you saying aloud in the business with friends or other customers present.There are other reasons for the decline too. I always carry cash over what I am going to spend to ensure I am capable to pay if the bank, connection or whatever else goes wrong and you are stuck owing for a meal already consumed.
Jun 25, 2013 4:33AM

I have a BofA AMEX that is fine locally. But before I travel I have to call the 800# to let the card company know where I'm going and when so the card is not denied at the counter when presented. Over zealous and ramped up fraud protection. I hardly use it anymore because of the hassle.

Jun 25, 2013 4:38AM
I was recently embarrassed while attending a conference in Namibia. The bank incorrectly presumed that my cash withdrawal at an ATM was a fraudulent transaction and blocked all my cards. It took a week and expensive international phone calls to get them to unblock the cards. In the meantime I had to borrow money to eat etc.
Jun 25, 2013 6:53AM
"The issuer can't demand immediate payment"... My bad, I did not know this. In letter, American Express demanded that I pay full the balance of more than 4K within 2 weeks after they cut me off or else I'd face their attorney. Fool me, I paid at once.
Jun 25, 2013 10:22AM
i work for a credit card company and it's true. if you do pay off your balance each month and pay no interest it will help your scores. another thing is if you spend under 50% of your credit line, that also helps your credit scores tremendously and most things these days do require a credit card, however i also get around 10 calls per day myself regarding online fraud so i would highly recommend a green dot prepaid card for online purchases. the majority of merchants including airlines will accept this form of payment since they are ran as a credit card.

also, the company i work for do assess annual fees if there is a rewards program tied to it or to keep the account open if it has been inactive for 6 mos or more. even if you purchase just a cheap cup of coffee and pay it in full, you keep the account active and no fees!

Jun 25, 2013 6:31AM
We'd all have fewer problems if the U.S. credit card cos. would invent in RFID tech, like Europe has, but profits have to come before investment on card customers' behalf. More & more places in Europe will be refusing cards because of this.
Jun 25, 2013 9:03AM

one other reason is the person left town / city on a trip from AZ. to TX. but did not tell the Credit card company and the card is used and shut off ............. I see this happen every time I travel....

They get mad but it's there to save there credit and money.......


A quick call can get your card back on in just short time. If you travel let your card company's know the dates and city's / state.


I always tell them the dates and states away from home - Never had a problem:

Jun 25, 2013 11:38AM
Credit cards suck. Stop feeding the beast. Use cash.
Jun 25, 2013 10:32AM
im also reading some of your comments and i feel for all of you who have had bad experiences with credit card companies. i know the American Express does make you pay your account in full every month so it was not inaccurate for them to allow you to pay within 2 weeks of closing your account. also with traveling because of high fraud the credit card companies are just trying to protect the card holders so if it keeps declining even after you called to alert them you will be traveling, which is highly recommended with every credit card company, then you could be in an area that has numerous fraud reporting. especially on the business side the company just wants to make sure your company reps are the only ones using the card. it does no good to yell and scream at reps or supervisors or even higher up because the reason it's declining is the system. there isn't anyone looking at a specific merchant and pressing a button telling that system to decline you. its the card companies system showing fraud has been reported with that merchant or that area where the merchant company resides so its protection. it's best to place travel alerts but they are not a 100% guarantee that your card will work wherever you plan on using it if it is a fraud area. just keep that in mind please. it will help us reps assist you better when you call if you have an understanding that we just want to make sure you are the only one using the card.
Also, make sure you understand fully the credit card companies policies and procedures as some of the things we do are by bank others are by law

After 62 years of a great credit score (damn near 800), establishing and operating my own plumbing company after retirement from the legal field, I've realized that if you deal with "good companies" such as USAA and avoid thieves like BOA, AE and Discover you'll be in good shape!  Never had a late payment, ever; paid more than the minimum every month; never defaulted on any card, no bankruptcy, in essence perfect credit.....but once I sold my plumbing company these institutions immediately reduced my available credit limits to practically zero (most were taken down to 200 bucks available) after having available credit of 12,000-15,000, often without previous notification thus reducing my credit score to 550!  Actually this was a boon for me because I immediately paid off the crappy cards and closed them!

Now, I'm happy I could give a crap about my credit score because I've bought everything I need while credit was intact and now that BOA, AE, Discover and Chevron/Texaco cancelled my card because I paid all of them off except BOA which was infamous for holding payment checks until the due date had passed even though I made payments the day I received its statement. I have no compulsion about defaulting on BOA - I did offer to draw up an Order of Default Judgment but they like to torture people with phone calls and threatening a lawsuit!  I'm soooooooo scared - take me to court you ruthless Bastards of America!  

Don't sweat the small stuff, pay your required monthly bills, mortgage, insurance, utilities, etc., and burn the credit cards.  Sign up and apply for USAAs products you won't be disappointed. Best insurance and banking institution in the country - USAA really cares about its customers and not to be too rude but screw the banks with their high fees, high interest rates and ridiculous arbitrary cancellations!
Jun 25, 2013 11:32AM
Like Nancy Reagan said "Just Say No"! BANKS SUCK!
Jun 25, 2013 12:21PM

I am old and have used credit cards for many years.  I have had only a few problems, all of which were due to the credit card company trying to protect me from fraud.  I learned to notify them if I plan to travel, especially outside the US.  I pay my bill in full every month - self discipline - if I cannot afford to pay cash, then I do not use the card.


So why do I use the card?  Convenience, and for cash back.  My annual rebates are usually about $500.  But, there is a problem of ethics here.  Clearly, credit card companies are charging merchants too much for their service.  But until the CC companies change that practice, I will take the rebate.

Jun 27, 2013 11:43AM

Maybe a follow on to my post.  Even though I keep my credit immaculate, my cards can still (and have been) be declined.  Each and every time it is due to "fraud" or potential fraud occurring on my account.  The CC companies have become super sensitive to any charges that do not fit your profile.  You start buying things that you never bought before or book travel to places never traveled before.  They say they are protecting you, but in reality they are protecting themselves as they have already agreed to not hold you responsible for fraudulent activity.  Usually the answer is use a different card and then call them up to find out why they are blocking the card. 


I think it is the CC companies fault to begin with.  They don't make merchants positively ID someone before accepting the cards.  That would potentially cut into the merchants business.  If this would happen, CC fraud would plummet and these credit monitoring services would go bust.



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