How to avoid business cards being frozen

If you use a credit card to pay business expenses and your card issuer shuts you down, even temporarily, it can be catastrophic.

As a small business owner for over twenty years, I have experienced various situations where credit card issuers have temporarily closed accounts. I’ve also heard quite a few horror stories from other business owners.

Here are some situations to avoid so you don’t see your credit card closed at the worst possible time.

Pay off your balance multiple times within a statement cycle

Also known as a “credit cycle,” this is when you make payments over the course of a month, allowing you to charge more than your total available credit.

For example, let’s say your credit card limit is $10,000. During the first week of the month, you charge $9,000 to the card and make a quick payment of $9,000. After the payment clears, you spend another $9,000 in the second week of the month.

The issuer considers this approach to be riskier. While paying off your balance and using your credit line again may seem reasonable to you, it’s a red flag to the card issuer.

This doesn’t necessarily mean your card will be closed, and if you have a long-term relationship with your card issuer, that might be perfectly fine. However, you’d be better off asking for a credit limit increase or asking if you can make a prepayment before any activity that exceeds your credit limit.

My company uses multiple cards and we make multiple payments each cycle. Generally speaking, we don’t do this with a brand new card, we try to make sure our spending ramps up over a few months.

Quickly increase spending on new cards

As far as I can remember, my new business card was temporarily closed twice. Both were with Chase. In one case, I needed to make a fairly large transaction shortly after receiving my brand new card. The charge was approved, but my remaining available credit is unavailable for the remainder of the billing cycle.

In another example, I ignored my own advice above and paid off my balance multiple times within the first few months of owning the card. No charges were initially denied. However, after paying off the balance mid-month, my online statement continues to show no credit available until the statement due date. In both cases, multiple calls to customer service resulted in no relief. But thankfully, the problem was resolved within a few weeks.

international transactions

International transactions can mean several different things. The most obvious is actually using your credit card when traveling abroad. In this case, I always try to call my card issuer and tell them when and where I will be traveling. Many card issuers say this is not necessary, but some are notorious for freezing cards after being used overseas.

Some also consider “card not present” transactions with overseas merchants risky. This could be as harmless as simply purchasing something from an overseas merchant online or over the phone.

Card issuers consider a variety of factors when assessing the risk of a credit card transaction. They may score a single international transaction at a low enough risk level to approve it. However, overseas trading patterns may be considered higher risk and result in the temporary suspension of your charging privileges.

Thankfully, my personal experience is that calling your credit card issuer to verify the transaction is usually enough to lift the temporary hold on your account.

Authorized User (Inappropriate) Behavior

It’s fairly common for small business owners to issue authorization cards to key employees. This allows them to get the same protections as business spending plans like Ramp and Rippling by authorizing only a portion of their credit limit to authorized users.

A few years ago, one of my accounts was frozen. I did not immediately find out that charging privileges were suspended because the issuer did not contact me. After my attempt to make a transaction using my card failed, I called the card issuer and learned that one of my employees was trying to get a cash advance on their card.

Pay from new bank account

The worst closure I’ve ever experienced was the most recent one. And, to be honest, I never saw this coming.

I’ve had a version of the Capital One Venture X Rewards credit card for almost five years. When the commercial version came out a few years ago, I applied and was approved. I moved most of my spending from my personal card to my business card and continue to use it regularly.

Recently, because my company was transferring its banking to another institution, an employee paid the balance on a Capital One Venture X business card using an account at the new bank we had just transferred to.

Capital One immediately closed all of my credit cards. After a few phone calls, it asked me to do a three-way call with the bank to verify that I controlled the account to which the payment was made.

Our new bank refused to speak to Capital One even though I was on the call. We even tried to get our merchant bankers on board, but the banks showed no flexibility on this policy.

Capital One, meanwhile, closed the account and requested a statement showing the payment was made, which meant waiting until the end of the statement period. We sent it and waited a few days with no reply.

Over the next few weeks, Capital One made multiple requests for additional business documents and made additional demands to speak with my bank. Each time, I would explain that we had tried it. Eventually, after about two months, Capital One relented and restored access to our account.

my opinion

In light of these pain points, it’s worth pointing out that in over two decades as a small business owner, one credit card issuer has never crippled my business due to a temporary closure. The same card issuer also managed to get new authorized user cards for my employees in less than 24 hours when we had an issue recently.

Which issuer? American Express. In my experience, it has been a great partner in these areas, especially when other issuers have let us down.

bottom line

If you’re not careful, your card issuer could close your credit card at the worst possible time.

The more your business relies on credit cards, the more caution you need to exercise. A temporary shutdown could be extremely disruptive, especially when employees rely on these cards to complete daily tasks like travel. (This also creates distrust among employees because they rarely know the whole story.)

Therefore, I recommend that small business owners have credit cards from multiple issuers.