Call Your Credit Card Companies

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If you are not aware of this you need to be.

Since the global financial markets went into a tailspin last September, credit card companies have taken it upon themselves to cancel your credit cards without discussion or warning.

So, if you have a zero balance, and think you are being so responsible by doing that - and you are - some credit card companies have just decided to cancel those cards.

Why? Well, they have a host of reasons. But whatever they may be, what I want to know is that since for the most part, people work very hard to maintain a good credit record, and work very hard to have access to affordable credit, then 1) why are these companies not required to discuss this matter of cancellation with you and 2) why is there not a process for appeal or review?

Today's Wall Street Journal did a nice short piece on this: Credit Card Issuers: Buy Something Or Else! I submit it is well worth your time to read these few paragraphs.

Now, if you are not concerned, you should be.

Credit cards serve some very useful functions. For example:

• They provide access to funds when you have none - albeit at a price. Hence, you should always have one for emergencies
  
• For many services like a rental car or a hotel room, you must provide a credit card to secure the room and also in the event of incidentals.
  
• Credit cards allow remote purchases via the phone and internet.

So, they are very useful. I just insist that prudent money management necessitates that credit card use must be moderated and managed.

Let's talk a bit about your credit rating. A good credit rating gives you access to credit, and access to lower rates. Did you know that when your credit cards are canceled, your credit rating could be negatively affected? Your credit score is determined by your debt relative to credit available. So when a card is canceled, your available credit falls.

Oh, and by the way, if you are depending on your rewards from any card - zero balances or not - you need to rethink that. Check out CNBC's article today: Credit Card Firms Slash Rewards To Cushion Losses

My two cents? Go call your credit card companies. Decide which cards you want to keep. And then if you must make small purchases regularly to keep those cards that you have zero balances on, you may want to consider doing so to keep your credit lines open. But make sure you don't sacrifice your debt management for it. And as for the 'by the way" with the rewards, I'd use 'em before I lose 'em.