Have you been thinking about closing or cancelling your credit card? If so, this article will give you the information you need to do it the right way. You’ll learn how to close a credit card and what steps are involved in the process. We’ve also included some tips for making sure your account is closed properly and that all of your rewards are claimed before they expire.
Let’s dive right in!
Will Closing a Credit Card Hurt My Credit Score?
If you are tired of paying a hefty annual fee for credit cards, you no longer use the credit card, unwanted promotional offers or you can’t resist spending what’s not in your wallet, closing the account might make sense. But canceling may hurt your credit scores if it is not done properly.
If you have a good credit score, there is no need to worry about closing your card and hurting it. Provided your credit card balance is $0 on your statements, you can close the account without harming your credit score.
It is also important to note that a negative credit history will stay on your credit report for seven years from the date it was first reported. The information does not simply go away because you cancelled the credit card.Also, if you already have a poor credit score, closing the account might not actually help your situation. Instead of focusing on one card that has too high an interest rate and is maxed out, it would be better to focus on other types of loans or debt before trying to cancel a credit card with good standing.
Below we walk you through how to cancel a credit card without hurting your credit score.
How To Close A Credit Card:
1. Pay Off Any Remaining Credit Card Balance
If your credit card has a balance, you’ll want to ensure it’s completely paid off before closing it. If not, you might become subject to interest rates on any remaining debt, which can lead to fees and snowball into more serious financial trouble.
It is also important not to assume that your card balance is everything you need to pay. Make sure to call your credit card issuer to receive the actual amount you need to pay off, which includes your balance, plus interest and any other fees incurred. If these additional payments are not paid in full then a new statement will be issued and this cycle can continue.
If you have a balance on the card when it is closed, keep in mind that this will stay with your credit report for up to seven years. This can lower your average age of debt and affect how much risk lenders see when considering whether or not they want to extend you a line of credit. You should always work towards paying off any balances before closing an account if possible – especially cards with high limits and rewards points.
It is important never assume anything, once you have made your final payment. Call your credit card issuer again and double check that there is nothing else outstanding on the credit card and that the balance is sitting at zero.
2. Redeem Any Outstanding Rewards
If you have accumulated cash back, points or other rewards, make sure that you use them before closing the credit card. If you don’t use these rewards, you will lose them when you close the card.
One exception to this is co-branded travel cards. They usually transfer rewards from a credit card to a loyalty program each month; these should not disappear. However, it is always best to ask your card issuer for more information and follow any of their specific instructions, so that you don’t lose out on anything in return.
3. Update Your Automatic Payments
If you generally use your credit card to pay bills or have automatic payments set up, it is important to ensure you switch these payments to a new or different credit card. Alternatively, you can connect your checking account directly to pay your bills.
If you don’t redirect your automatic payments, the payments won’t clear and as a result, you could be hit with late fees. Once you have done this, call your bank to let them know that you will be cancelling this credit card, so they are aware that additional charges shouldn’t continue. Also, check your statements to ensure that you’ve caught any recurring payments.
4. Inform Any Authorized Users On The Account
If you have additional people that are authorized to use the account, it is important to let me know that the account will be closing. This will prevent any potential issues of them using the card in between when you have made the final payment and when you close it. If you don’t give them plenty of notice, you may incur additional charges.
5. Request Account Closure
After providing the necessary information and paying off any miscellaneous balances owed by closing the account, wait approximately two weeks before calling them again about making the closure permanent. This gives time for everything else to go through their system first – like cutting off access to account from anyone that has been using it, such as automatic payments etc.
Be warned, it is in credit card company’s best interest to keep you on file and using your credit card. Therefore, they may try to upsell you or convince you not to cancel your card. If you have made the decision that you want to proceed with cancelling this card then hold your ground and continue to confirm that you would like to simply cancel the card.
6. Send A Cancellation Letter
It may sound a little strange to be sending a cancellation letter, however it is incredibly important to ensure that you have written documentation when it comes to cancelling a credit card. Chances are that the representative you spoke to did close your account. However, there have been situations where this simply isn’t the case or there was an error made or glitch in the system.
If you follow up with a simple letter, you avoid any potential confusion about your desire to close your account. We recommend including the below:
- Request for the account to be closed
- Include your name
- Include your address
- Include your phone number
- Include your account number
- Include any additional details of the call with the bank representative
You may decide to send the letter via certified mail to ensure that it is delivered and you have proof of that. You can also ask for written confirmation that your account has a zero balance as well.
7. Check Your Credit Report
Once your account is closed, it is important to check your credit report. It may take some time to show up on your credit report (possibly a month or two) so be patient. When you receive the credit report make sure to check that the reason for closure was “closed at consumer’s request” or something else that is similar to that.
If the statement says that it was “closed by card issuer” make sure that you get this resolved by contacting the credit card company or bank. If your credit report states that the account was closed by the card issuer, your credit score could potentially be harmed.
8. Destroy your old card
The final step when it comes to credit card closing is to cut it up into tiny pieces, some people use a shredder because it is the easiest way to destroy the old credit card.
The Bottom Line
If closing a credit card won’t affect your credit score and it is something that you want to do, then by all means close the credit card. By cancelling your credit card, you are saving yourself the annual fee, interest payments and any potential security risk that could come with keeping your credit card open.
However, if you have a poor credit score and are curious about how closing a credit card can affect your score and if it will be an issue for you down the line, don’t make any rash decisions before checking with a professional financial advisor or contacting the issuer of your current credit card.
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