What to do when your credit card issuer blindsides you

Aditya Dwivedula wasn't happy when his oldest credit card got canceled — especially since it happened without any warning.

"I basically got an email saying my card is no longer valid, essentially because I hadn't used it for two years," says Dwivedula, of Seattle. Concerned about how the closure of the 13-year-old account would affect his credit score, he asked the card issuer to reconsider. It offered to reopen the account — but only after running a credit check that would likely knock a few points off his score. Reluctantly, he agreed.

Getting notified beforehand could have helped him avoid the whole ordeal, he says. "I wish they had just told me ahead of time, 'Hey, you just need to use your credit card every six months.'"

It's easy to feel blindsided when a credit card issuer makes a negative change to your account, such as closing it, raising your interest rate, or reducing your credit limit. Such steps are legal, but may not seem fair. Here's what you can do to bounce back.

READ YOUR TERMS
When you apply for a credit card, the terms on the account aren't etched in stone.

"In broad layman's terms, that (credit card) contract basically says the bank can do quite a lot of things, including changing the conditions," if it gives proper notice, says Naeem Siddiqi, director of credit scoring and decisioning at SAS, a company that provides major banks analytics software for making credit decisions.

Generally, issuers must notify you about significant changes to your account 45 days in advance. But you might not get a heads-up if:

— You already agreed to certain changes. For example, your issuer might not warn you about an interest rate increase due to a hike in the prime rate. That's because when you applied for a card with a variable interest rate, you agreed to changes like these. Likewise, you probably won't get a reminder if a zero percent interest period is about to expire.

— You're behind on payments or haven't used your account for several months. In this case, issuers usually can close your account, causing you to forfeit any accumulated rewards, or reduce your limit without warning. However, they're still generally required to give you 45 days notice before tacking on penalties related to exceeding a newly reduced limit. Typically, you'll also get at least 45 days notice if your issuer is increasing your interest rate because you've fallen behind on payments.

Issuers also are generally required to provide reasons for negative changes, if those changes affect only some of its accounts, not all. If you don't understand why your issuer is modifying your account, call and ask.

WEIGH YOUR OPTIONS
Depending on the circumstances, you might be able to get an unfavorable account alteration reversed.

"Individual changes (to accounts) can always be made," Siddiqi says. With decision-making software, he says, issuers automatically apply changes to all accounts that fit certain criteria. But you can call your issuer and ask to have the decision overturned, he says. For example, if you have other accounts in good standing with an issuer, it might let you reopen an inactive account, he says.

Even when granted, reversals aren't always as simple as choosing "undo" from a menu. You might have to pay a fee to reinstate lost rewards. Or the reversal could trigger a new credit check, as was the case for Dwivedula.

If your issuer gives you 45 days notice about a change — say, if the annual fee on your card is about to go up — you might be able to reject the change. If you do, your issuer may close your account. But under federal law, you can still pay down your balance over time without suddenly increased interest rates or other penalties.

CONTROL WHAT YOU CAN
If you don't want to close your account and can't get the decision reversed, you might be stuck with an unpleasant change. Take these steps to minimize the impact of that change and prevent future surprises:

— Keep your accounts active. If you're keen on keeping a certain account open, use that card to make purchases every few months.

— Adjust your spending. If one issuer lowers your limit or closes your account, reduce the outstanding balances on your remaining cards. It's better for your credit score to use as small a percentage of your available credit as possible.

— Pay in full and on time. An increase to the interest rate or late fee won't matter if you never pay late or carry debt.