Steps to Successfully Close Your Credit Card Account
There are a variety of reasons a person might want to cancel a credit card. However, you also have to consider the possible negative impacts on your credit. You may also not know how to go about closing credit card accounts correctly. We will talk about reasons people may cancel their credit cards. We’ll also talk about the process of closing credit card accounts. Finally, we’ll discuss how this can have a negative impact on your credit. Once you’ve decided on closing credit card accounts, it’s time to do it correctly. This is a multi-step process, and you should follow each one carefully. Once you’ve finished reading this, you should have less anxiety with closing credit card accounts.
How to Cancel a Credit Card in Five Steps
Step 1. Gather Your Contact List
You’ll have to contact your card’s customer service to begin the closing process. It’s helpful to find and write down each number, so you have them for easy access. You’ll also need their mailing address and a monthly statement. Once you have this, you can go to step two.
Step 2. Redeem Your Rewards
Don’t let your rewards to go waste. Once you close your account, your rewards will be gone unless you’ve redeemed them. Check the rules for your card’s redemption process and start them as soon as possible. Some cards take weeks to process or only redeem once a year, and this could slow you down.
Step 3. Pay Off Your Balances in Full
Pay your current balance off, or transfer it to a card with no balance transfer fees. You won’t be able to close the account until the balance reads zero dollars completely. If you’re worried about additional charges, ask for the card to be frozen. This will allow you to pay the balance without adding more to it. So, if you carry a balance from month to month, you have to pay it in full for two consecutive months. This will wipe out any remaining interest charges.
Step 4. Contact the Issuer; Tell Them You’re Closing the Account
Depending on the card, you may not even have to speak to a representative. Some allow you to cancel through an automated process; others make you talk to someone. So, confirm that your card’s balance is at zero, never assume this. Also, tell the card’s representative that you want them to note that you’re closing the credit card account at your request. Finally, ask for a name and address that you can send a notice of cancellation confirmation letter. Make sure you get a way to identify the representative you spoke to and record the details of the call.
Step 5. Send a Cancellation Letter
For extra insurance, send a cancellation letter to the card issuer. Ask them for confirmation that the account has a $0 balance. Include your name, address, phone number, account number, call details, and the representative’s identifier. Also, send the letter by certified mail, and keep a copy for your records. Finally, be patient and monitor your credit history.
Reasons Why Someone May Close Credit Card Accounts
If you find yourself overwhelmed by your credit cards, you may decide to close a few. There are several reasons why someone may choose to close an account, and we’ll discuss them. This section also should help you decide if you should cancel your credit card or not.
- High Annual Fee. If the only reason you’re closing your account is the annual fee, there are other options. Try calling your card issuer and asking them to waive or cancel the fee. This could save you from having to cancel the credit card. If you’re using a rewards card, see if your rewards are outweighing the annual fee. If not, it may be time to consider closing the account.
- Trouble Keeping Track of Your Cards. Many people open multiple credit cards. If you did and you’re starting to have trouble remembering them, it may be time to downsize. This will stop you from missing payments or be late paying them.
- Have to Control Your Spending. With multiple cards, comes multiple chances to spend. You may consider closing ones if your spending is getting out of control. You’ll have less opportunity to rack up balances if you have fewer cards. Furthermore, closing a credit card account should help you curb your spending quickly.
Does Closing Credit Cards Hurt Your Credit?
If you’re considering closing credit card accounts, be aware this can hurt your Fico credit score. Your credit card utilization may go up. This is the amount you spend versus the amount of credit you have available to use. If you close a card without paying down balances, your utilization goes up. This will drop your credit score. For example, say you have a card with a $2,000 limit and one with a $1,000 limit. You have a balance of $800 on the card with the $2,000 limit. Your total credit limit would be $3,000. If you divide the $600 balance by the $3,000 limit, you get 27 percent. Then, if you close the card with the $1,000 credit, your limit drops to $2,000. If you divide $800 by $2,000, you get 40 percent.
This is 10 percent over the maximum level you should have for your credit utilization. You can also reduce the age of your credit history by closing credit card accounts. This factor can also lower your score. So, if you’re planning on closing an account, close a newer one. You want to keep your older cards open and in good standing.
Closing Credit Card Accounts
Closing credit card accounts can be a detailed process. If you’re careful and follow the steps, it can be painless. You have to make sure to follow up and check your credit history. Finally, if you close your credit card accounts, close the newer ones, and pay off the balance in full. Each of these tips will help you in complete the account closing process.