If you’re thinking about closing one or more of your credit cards, you’ll want to be sure to go about it the right way. Whether you simply don’t use the card anymore, or the annual fee is driving you up a wall, there are certain steps that can help you avoid possible issues arising from the closure. So, before you pull the plug on a credit card, here are some important factors worth considering.
Should You Really Cancel Your Credit Card?
First of all, understand that whether you’re closing a secured credit card or a standard credit card, it isn’t always the best course of action, even if you don’t use it. For example, if you’ve had the card for many years and have always made on-time payments, keeping the card open could be in your best interest. That’s because your payment history and the age of your credit are two of the most important factors that make up your overall credit score. When you close an account in good standing, you’ll not only reduce your overall credit limit, which could wind up hurting your credit score, but you’ll eventually lose the history associated with that account. Of course, this won’t happen immediately since good information on a closed account can be reported for 10 years after the account has been closed. But if you’re thinking of closing one of your oldest credit cards, it’s wise to consider how it will eventually affect your scores.
What if You Can’t Justify the Annual Fee?
If you’re thinking about closing a card due to a steep annual fee, it may be worth giving your credit card company a call and asking them to waive it. Many companies will consider doing so, especially for long-term customers, so it certainly can’t hurt to ask. You may be able to keep your account open and save yourself some money in the process.
So You’ve Decided Closing Your Credit Card Is Right for You
There are, of course, times when canceling your credit card really is your best choice, such as when you have a joint credit card with your spouse and you’re going through a divorce. By fully understanding the impact of closing a credit card on your credit, you can know what to expect from the process. It really is something that should be done after careful consideration.
If you’ve weighed the pros and cons and decided to close your card, there are steps you can take to ensure the process goes as smoothly as possible. Here are some tips on how to cancel a credit card:
- Check Your Balance & Pay It Off. Begin by making sure that you don’t have any outstanding debt on the account; if you do, then you’ll need to pay that off. You may also consider transferring the balance to another card that you plan on keeping open (although there may be fees associated with doing so).
- Cancel Online or Over the Phone. Depending on your credit card company, you can typically cancel an account either over the phone or online. Online cancellations tend to be more convenient, especially if you want to avoid a “sales pitch” on the phone, as most companies will try to retain you as a customer. The benefit of speaking to someone directly, however, is you can discuss any pertinent account details and get any questions you might have answered immediately.
- Request Formal Confirmation. Once your card is canceled, it’s also not a bad ideal to submit a written confirmation to your card company and ask for a confirmation letter in return. Keep a copy of this letter for your reference.
- Check Your Credit Reports & Scores. Keep an eye on your credit reports so you can confirm the account has been closed. You’ll also want to check your credit scores to see how canceling the account has affected your credit. Make sure everything looks accurate, and don’t be afraid to file a dispute if anything appears incorrect. You can get your two free credit scores at Credit.com.