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How to Cancel a Credit Card Without Ruining Your Credit ScoreJuly 2, 2020
If you have a hard time stopping yourself from swiping your credit card, or if your credit card is costing you hundreds of dollars in fees per year, then it may make sense for you to close that account.
At times, consumers may also cancel their account if they are tired of managing too many credit cards.
Depending on your situation, cancelling a credit card can make sense; however, when you do so, keep the following Do’s and Don’ts in mind.
Before closing a credit card, Do
- Cancel any automatic payments such as gym membership fees or magazine subscriptions linked to your credit card, or else you may have to pay late fees or penalties when these services bill the cancelled credit card.
- Redeem your existing reward points in full, or risk losing them when the account is closed.
- Pay your balance in full and check if that account balance has dropped to zero before you call your issuer to cancel the credit card.
Having said that, you should know that it is possible to close accounts with an active balance as well – all you need to do is request your issuer to close the account to new charges while you pay down the existing balance.
However, make sure you don’t forget about making payments until the balance reaches zero, or else the account may become delinquent.
- Check your credit report to make sure that the account is reported as closed.
If the status hasn’t changed two to three months after you requested your issuer to close the account, it may be wise to call your card company and follow up.
At the same time, Don’t
- Assume that cutting up the card or throwing it away is equivalent to closing the account – you’ll need to call the number on the back of the card and tell the customer care representative that you wish to cancel the account.
The company may try to retain you as a customer by offering certain perks in lieu of keeping the card open; however, if you’ve made up your mind for cancellation, tell them a polite and firm no.
- Close all or most of your credit cards at one go, as it can look suspicious to creditors.
Moreover, closing even one single credit card can cause a temporary ding to your credit score – as your total available credit limit gets reduced by the credit limit on the closed card, your credit utilization ratio may shoot up.
This in turn can negatively impact your score.
- Close the oldest credit account that you have as it often acts as a marker for your credit history.
When you close this card, your credit history may appear shorter and as a result your score may suffer.
A better approach is to evaluate why you want to close the card (say it’s because the interest rate is too high) and then try and fix the problem.
For example, you may call the issuer and request him to lower the rates, or refrain from using that card altogether and use another one with lower rates in its place.
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