October 14th, 2013
Banks don’t close down accounts for no reason. I have significant point balances in currencies like Chase Ultimate Rewards and American Express Membership Rewards and don’t sweat it because I avoid risky behavior (even if I do have a couple dozen cards from those 2 banks). The 3rd major transferable point program, Starwood Starpoints, is not affected even if your card is closed.
Those that are more risk-averse or who engage in riskier activity should definitely look into transferring your points to an airline where they will be safe. However points are far more versatile when they’re in a transferable point system as you can wait until you want to redeem for travel before locking them into a single program. In this post from a year ago I talked about some of the best Chase transfer options.
If you are hit by a financial review from American Express (F/R) they will ask for your tax returns. As long as you made money on the books and filed a return you should pass the review. Your credit lines may be reduced if your taxes show less income than you reported when you applied for the card. If you make nothing on the books then you can ask if they will accept your bank statements. If they won’t just go ahead and close the accounts yourself so that it doesn’t say closed by creditor on your credit report. American Express will allow you to transfer Membership Rewards points even if you are under financial review.
Other banks like Citi and Chase can take adverse action (A/A) if they feel you are a risky customer. In these cases that may reduce your credit lines or close your cards. Some people have been able to get the bank to reconsider and reopen their cards, so it’s definitely worth trying to appeal. With Citibank ThankYou points the points have been confiscated. With Chase some people have had points confiscated while others have been able to appeal and transfer the points or at least get 1 cent per point even if the decision to have their cards closed remains final.
Typically these things can happen when you have several risk factors and the bank decides it’s too risky to have you as a customer. Here are activities you should try to avoid:
-Using the majority of the credit line on any given card.
Ideally for your credit score you want to use as little of your available credit on any given card as possible. This can be accomplished by paying off 99.9% of your bill before your statement generates or by using business cards.
Even if you do that the bank will not like seeing you use too much of a credit line as it can mean that you are racking up a bill that you won’t pay. Excessive spend is a trigger for financial review and adverse action. As with everything in life, moderation is key.
-Uploading gift cards online to Bluebird.
Bluebird now allows you to upload $100 per day online from your debit card for free. Don’t do it from a gift card as it’s a definite trigger to get your account suspended.
Far better off going to WalMart and using their ATM machine or any cashier to load a gift card on Bluebird. Besides for being able to do 10x the amount per Bluebird card it takes away a huge risk factor. But for gosh sake if you load with a cashier just say that you want to load your Bluebird from your debit card and don’t say you want to use a gift card.
Or just buy Vanilla Reloads from stores like CVS which transfer to Bluebird online without any issues. Most CVS stores will take credit cards but even in the same store some cashiers may decide not to allow it while others will. When I was in Miami last year the cashier in the front said no but the pharmacy did it without a problem.
Personally I also avoid making online Bluebird transfers to checking accounts. Better off paying off your credit card bills, rent, mortgage, or even writing a Bluebird check to your spouse. However I wouldn’t deposit that check into an account with a bank that I have credit cards with. I also don’t have Amazon Payments deposit my balance into an account with a bank that I have credit cards with.
-Having too much total credit.
It’s been said in the past that having a credit line over $25K on any American Express card can trigger a financial review. If your credit lines are far beyond the income that you report it can also be a red flag.
-Not paying your bills on time and/or carrying large balances.
These actions will lower your credit score significantly. If your score has a big drop it can trigger action from other banks besides the one where you had a late bill or carry a large balance with.
-Using your credit line multiple times in a month
Banks don’t love it when you pay off your bill several times in middle of a month just in order to be able to spend beyond what your monthly credit line is.
-Adding too many additional users.
This is a known trigger for an American Express financial review.
-Transferring/Receiving Ultimate Rewards points to/from another Ultimate Rewards points account that belongs to someone besides you or your spouse.
This is a known way to get your Chase accounts shut down. Anecdotal evidence is that transfers directly to someone else’s airline/hotel account (as opposed to Ultimate Rewards account) is safe, though a couple people have reported that they think it may be a trigger as well.
-Depositing excessive cash or money orders into a checking account.
Banks don’t like to see excessive cash/money order deposits into a checking account as it can look like money laundering. If you do that with a bank that you have a credit card with it can cause a shutdown of both your checking account and your credit cards.
-Having a 3rd party pay off a credit card bill or deposit a check into your account.
Pay off your own credit card bills from your own bank account. Don’t deposit checks that aren’t made out to you.
-Getting multiple checking account bonuses.
Some people have reported being shut down for getting multiple checking bonuses.
-Paying for the mistakes of others at your address.
Typically when a bank does a financial review or decides to close accounts they will go after all accounts located at the same address.