"I'm sorry, but your card has been declined."
If you hear these alarming words at the checkout counter, you probably fear the worst. Did your credit card issuer cancel your account? Not necessarily -- but they may have put your ability to charge on a temporary hold. Before panicking, know why your card might be in time out, how to bring it back and the way your credit rating might be affected.
Suspension causes and reactivfation methods
There are a number of reasons a creditor may suspend use of your card, says Steve O'Halloran, public affairs director for Chase Card Services. "We look at a number of factors -- for example, concerns about fraud -- when evaluating a customer's financial and credit situation and determining if any action needs to be taken."
Common grounds for postponing charging privileges (and the reactivation steps you can take) include:
They've reduced your credit line. The recession, combined with tightened banking regulations, has resulted in many issuers lowering their cardholders' existing credit lines. If you're carrying debt, such a reduction could put you at or over the limit, squelching your borrowing ability.
To reactivate: Pay down your balance. Aim for opening up at least 60% of your credit line. Not only will you be able to spend with your card again, but your FICO score will improve. More, as your score escalates, the credit line you'll qualify for will probably increase as well.
You've ignored your account. When was the last time you pulled out that plastic? If it's been years, better check the expiration date -- it could be expired. Your credit card company most likely sent you a new card, but if you never followed the activation instructions in the letter, you won't be able to use it.
To reactivate: Contact your creditor and explain that you still want your account, and request they send you another card so you can get it up and running -- without having to reapply.
They suspect fraud. And the most typical reason a card could be blocked? The credit issuer picked up on suspicious activity. "The security division tries to get a hold of the client and client does not call back, so they suspend the card until they talk to the cardholder," says Wayne Sanford, owner of the credit restoration company New Start Financial. The problem is, sometimes it's not fraud at all; it's you visiting unfamiliar places or dramatically changing your charging habits.
To reactivate: Prove you are you. Because the credit issuer, not you, will be held responsible for illegal charges, they'll protect their interests by shutting the card down until you communicate with their fraud division. It's less of a hassle than you may think. Rob Garcia, a startup entrepreneur from Silicon Valley, Calif., who travels constantly, says his American Express card has been suspended for potential fraud three times, but reviving it was easy: "In every case, they have canceled it immediately, and sent me a new one to my house next day air, in addition to reversing the fraudulent expenses."
It's not you, it's them. According to John Ulzheimer, president of consumer education for SmartCredit.com., external economic fluctuations and internal business model changes may make a creditor re-evaluate a cardholder's account. Both are factors in changing lending risk, so the creditor may suspend some customer's accounts. "They aren't so adverse to doing business with you that they will close the card, they just may modify the terms of the account."
To reactivate: Negotiate fresh terms. Call your credit card company and ask what interest rate and credit limit they would be willing to offer you so you can charge again.
You've made one too many late payments. Maybe it is you after all. Most credit card issuers will forgive an occasional tardy payments, but being significantly delinquent now or paying late too often in a short span of time may give them cause for credit pause.
To reactivate: Start making steady payments immediately, says Ulzheimer. "Change your patterns so they become more comfortable doing business with you." After about six months, get on the phone and point out how well you've done and request that they allow you to use the card again.
How a suspension may affect your credit rating
If your credit issuer has frozen your ability to charge, your credit report may indicate a "CLS" notation next to the account -- a code that stands for "credit line suspended."
"The code will remain on the account until the credit card provider reports an update on the status on the account," says John Branham, TransUnion's spokesman. In other words, the CLS acronym will be removed when you're able to charge again.
So how damaging is a CLS on your credit score? The code itself is irrelevant. According to FICO, a revolving credit account is either open or closed, and the suspension notation is not factored into their scoring model.
What matters is the way you borrow and repay. "The key to everything for FICO is the contents of the credit report," says Jeffery Scott, a spokesman for myFICO.com. That means once you do wake a dormant card, use it regularly and responsibly.