The Safe Way to Cancel a Credit Card
Is Credit Card Cancellation Bad? You may have heard that closing a credit card account can damage your credit score. And while it is generally true that credit card cancellations can affect your score, this is not always the case.
In general, leaving your credit card accounts open is the best option, even if you are not using them. However, there are good reasons to decide to close the account. Read on to find out what they are and how to get the card canceled correctly.
When to Credit Card Cancellation?
For some people, canceling a credit card can be a relief. In addition to celebrating after getting out of a credit card debt, there are many other reasons to cancel a card. Not using a card, reducing the number of cards you have, not paying a hefty annual fee, or shifting brand loyalty from one hotel or airline to another are all major reasons for closing a credit card account.
Whatever the reason, you may be wondering what will happen when you take this step. Will it hurt your credit? When do you have to pay your balance? We will look at some of the reasons you can cancel a card and the things you need to consider before, during, and after the cancellation process.
What Happens When You Close Your Credit Card?
When you close the credit card, you will no longer be able to use it. You are still responsible for paying the outstanding balance of the card. Depending on the type of rewards you receive from the card, you may lose access to them. It is important to consider your rewards before closing the account.
Similarly, closing a credit card can affect your credit score. Before closing the card to avoid any unintended consequences, you should understand how your credit score can be affected.
If you still want to cancel your credit card after reviewing your options, follow our step-by-step guide.
1. Pay any outstanding balance.
Make full payment of your credit card balance before canceling your card. While you may be able to close an account with a balance, some issuers allow you to close the account for new charges while you pay the balance, we recommend that you pay it in full. This ensures that you do not forget about any balances or fees.
You may also want to consider completing the balance transfer before closing the card. Any long-lasting loan can be transferred to a balance transfer credit card which offers interest-free for up to 21 months.
After paying your balance, make sure you also update any subscriptions and automatic payments on the new card. These payments will not be accepted after your account is closed, and you may be at risk of service interruptions or fees from the billing company.
If you do not have a reward card, go to the third step.
2. Earn any prize.
If you cancel the Rewards Credit Card, any unused cash back, points or mail can be confiscated when the account is closed. It is a good idea to redeem or transfer these rewards before closing your account so that you do not lose the rewards you received.
Take a look at the excellent prints of your card rewards program so you know the redemption terms. For example, travel credit cards can allow you to transfer points to hotel or airline loyalty programs or to family or friends. Cashback Credit Cards generally allow you to deposit cash back into a linked checking account but be aware that the minimum redemption amount can be up to 25.
3. Call your bank.
After paying your balance and redeeming any rewards, it’s time to begin the cancellation process. Call the number on the back of your credit card to speak to a representative.
Before asking to close your account, double-check that there is no balance. If you have been carrying a monthly balance, there may be outstanding interest, which accrues between the time your bill is sent and the time you pay.
After confirming the balance is zero, let the agent know that you want to close your account permanently. The agent may try to discourage or retain your offer, but at the end of the day it is your decision, so reaffirm that you want to cancel your account. And let the agent know that you want them to note that the account is being closed at your request, which ensures that your account does not appear to be closed by default.
Make sure you’ve got the key information: the date and time of the cancellation request, the name of the person you’re talking to, and a mail address where you can send a written cancellation letter.
4. Send a cancellation letter.
Sending a cancellation letter after your phone call sounds old-fashioned, but it’s an important step that should not be overlooked. Problems are the representatives you have spoken to close your account, but there is always the possibility of error or computer malfunction.
Follow up with your card issuer with a short letter expressing your desire to close the credit card. Add that you want to close the account “at the request of the customer” and include your name, address, phone number, account number, and your call details with the bank representative.
As an added layer of protection, send the letter by authenticated mail so you can prove that it was delivered. You can also ask for written confirmation that your account has been closed with a $ 0 balance.
5. Check your credit report.
Be patient as it may take a month or more for your credit report to reflect a canceled credit card. Once you see the closed account on your credit report, verify that the reason for the closure is “closed at the request of the customer” or something like that. If you see a different reason, such as “issuer by issuer”, contact your bank to resolve this issue as it could potentially damage your credit score.
There are several ways you can view your credit report for free: Annual CreditRepoint.com from each of the three credit bureaus (TransUnion, Experian, and Equifax) once a year, every 30 days with Experian, or Capital One.
6. Destroy your old card.
Once your account is officially closed, you may lose your card. The easiest way to do this is to put your card in a shredder. You can also cut it into small pieces.
If your card is made of metal instead of plastic, such as the American Express® Gold card, these options will not work. You will need to contact your bank and request a prepaid envelope that you can use to return your old card. Once received, your bank will safely dispose of it.
How to Cancel a Credit Card in 6 Steps
Once you decide to cancel a credit card, here’s how you can shut it down:
- Start by redeeming any unused rewards before canceling.
- Pay off or down all of your credit accounts—not just that of the account you’re canceling. Canceling a credit card with a $0 balance can still hurt your score if your balance is positive on other cards because your credit utilization will increase.
- Call your credit card issuer (or check online) to confirm your balance is $0.
- Contact your credit card issuer to cancel your account. Request a written confirmation that your balance is $0 before closing.
- Thirty to 45 days after cancelation, check your credit report. You want to see a report that the account was closed by the cardholder and that the balance is $0.
- If there are any issues, open a dispute with the credit bureaus.