Ask Liz Weston

Get smart with your money

Credit Cards

Q&A: Your credit card was unfairly canceled? Here’s how to fight back

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Dear Liz: For decades I owned two credit cards that earned airline miles with all my expenditures. I always paid the bills in full on time and never missed a payment. Earlier this year, I mailed in checks to cover the balance as I always do. But then I noticed the checks had not cleared my account after three weeks. I assumed the payment was lost in the mail, so I stopped payment on the checks and paid the amount I owed in full online. But then the checks came through to the bank. Since the checks had been stopped, they were returned, and even though I had paid my bill in full, both of my cards were canceled.

I called the customer service number several times and spoke to supervisors and they all said I had a great case, but then I received letters back rejecting my requests to get my cards restored. I tried to apply for a new card and that too was rejected. My credit rating is very high, and this seems very unfair to me as a longtime loyal customer. I have other credit cards but these were the most important to me for the accumulation of miles as I travel a lot. Is there anything that can be done to reverse the decision?

Answer: You need to attract the attention of a human being with the power to override this credit card issuer’s automated systems and that’s no easy task.

You did the right thing by calling the customer service number several times, since phone reps can vary considerably in their ability to solve problems. You might have to cycle through several reps before you find one with enough savvy, training and interest to actually help you.

Since you washed out with the phone reps, your next step should be contacting the office of the bank’s chief executive. That may just earn you a form letter, or you may catch the attention of someone who realizes how unfair the cancellations were and who is motivated to help.

In the past, a complaint to the Consumer Financial Protection Bureau often prodded banks and other companies to do the right thing by their customers. The current administration’s attempts to kill the bureau are being challenged in court, and the agency is currently accepting complaints again, but it’s unclear how much help you can expect to get.

Even if you can’t get the bank to reconsider, you should resolve to stop sending checks through the mail. Mail theft and check fraud are soaring, while electronic payments continue to be a safer and more secure way to pay.

Also, you don’t have to give up accumulating miles for your favorite airline. Other credit card issuers offer general travel rewards that allow you to transfer miles to airlines (and hotels and other travel providers). While airline-branded cards can help you earn elite status and come with other perks, general travel rewards cards offer the flexibility to book with a number of different carriers.

Q&A: The pros and cons of rewards cards with high interest rates

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Dear Liz: I expect to travel to Europe in the next few months. I applied for a new credit card to take advantage of its “no foreign transaction fees” policy. With a credit score of 740, I figured I would get a decent rate. Today I learned that I’m approved with a rate of 29%, which seems very steep. I want to turn this down rather than pay that rate. How do I do that, and what will the effect be on my credit score?

Answer: Don’t close the card. Rethink your strategy. You most likely got a rewards card, since those are typically the ones that don’t charge for foreign transactions. Rewards cards usually have high interest rates, so the only smart way to use one is as a convenience: Charge only what you can afford to pay off when the bill comes. Ideally, you’ll have saved for this trip so that won’t be a problem.

If you do wind up with a balance, consider transferring the debt to a low-rate card. But that, too, needs to be paid off relatively promptly, since low rates are typically teaser rates that expire after a few months.

Generally it’s better to borrow only for something that can grow in value over time. A reasonable mortgage makes sense, because a home typically appreciates. A moderate amount of student loan debt can pay off in higher incomes.

If you must borrow for something that doesn’t appreciate, such as a car, opt for the shortest possible loan to minimize the interest you pay. Avoid borrowing for vacations and travel, since those should be paid for out of your current income.

Q&A: Simplify your finances with fewer credit cards

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Dear Liz: I have too many credit cards that I opened to get frequent flier points. I understand that closing a credit card lowers your credit scores. How long does the ding last? How long should I wait before closing another card? Do you have any other advice on this subject? You probably have discussed this in previous columns but it might be worth repeating.

Answer: If you have a lot of cards, closing a few is unlikely to significantly hurt your credit scores as long as you do so strategically.

A big chunk of your credit scores is determined by how much of your available credit you’re using. You want a large gap between the amounts you charge and your credit limits. Try to keep open the cards with the highest credit limits. If you have multiple cards with the same issuer, ask if the credit limit from a card you’re closing can be transferred to one you’re keeping.

Even if your scores do dip because of a closure, the effect is likely to be short-lived if you continue using credit responsibly.

Ideally, you would review your portfolio of credit cards every year or so to determine which cards to keep and which to close. Travel rewards cards typically have annual fees, sometimes significant ones, so you’ll want to make sure every card you have is at least paying for itself in annual rewards and benefits.

Also consider the mental load involved. As you age, you may find it more difficult to monitor multiple accounts and keep track of all the details. You may want to simplify your finances by winnowing your cards down to just one or two. At that point, keeping your finances manageable will be more important than maintaining the highest possible credit scores.

Q&A: Credit cards and co-signers

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Dear Liz: My son is in his mid-20s. He has a credit card that we co-signed and that has a credit limit he would likely not qualify for on his own. He would like to remove us as co-signers as he starts to take more personal control of his finances. Would it make more sense to apply for a new card using only his income information, and then slowly stop using the old card? Or is it better just to take the hit on his credit rating now and request our removal from the old card?

Answer: It’s not clear whether you’ll be able to bow out of this arrangement without closing the card. Most major credit card issuers don’t allow co-signers. More typically, parents would add their children as authorized users. While the parents can remove their children from the account, the opposite isn’t true.

If this is a co-signed card, the issuer may have an option for removing you. Your son will need to call and ask.

In general, though, it would be better for his credit to apply for a card on his own and leave this account open.

Q&A: Beware foreign transaction fees when using credit cards abroad

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Dear Liz: I have a question regarding the use of credit cards for foreign transactions. Are the card companies required to use a certain exchange rate? I’ve used two different cards, and the one that charges a fee used a better exchange rate. The total cost to me, including the fee, was less than the other card. How can I find out what exchange rates are used?

Answer: You can always ask. Credit card companies may use a number of different exchange rates. Often they use the ones set by their payment networks, such as Visa or Mastercard, or by their issuing banks.

Keep in mind that exchange rates are constantly changing. Unless you used the two cards within a relatively short period, it would be hard to draw conclusions about which got the better rate. Also, you will get a much worse deal if you ever agree to a “dynamic currency conversion” that charges the transaction in U.S. dollars rather than the prevailing currency. When offered the choice, opt for the charge to be in the local currency.

Most travelers find they’re better off using a credit card that doesn’t charge foreign transaction fees. These fees are typically just another profit center for the issuing banks.

Q&A: After her husband died, a widow’s credit limit plummeted

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Dear Liz: You’ve mentioned how important it is for spouses to each have credit cards on which they are the primary account holder. My husband died last year. We had a credit card with statements that showed the charges we each had made on our separately numbered credit cards. I found the account was in his name only. I had to get a new credit card in my own name, and the credit limit dropped from $75,000 to $7,000. Hope this warns others.

Answer: It bears repeating that most credit cards these days are not joint accounts. If two of you are using a card, one is probably the primary account holder and the other the authorized user.

After a primary account holder dies, credit card companies are often willing to work with surviving spouses who were authorized users to establish new accounts. But as you experienced, the credit limits for these new accounts may be much lower than those of the original.