How to cancel your credit card without wrecking your credit score
If you’re thinking of canceling a credit card, it’s not as simple as cutting it in a half and throwing it away.
If you’re not careful, cancelling a credit card can hurt your credit score because it can increase your credit utilization rate, which is the percentage of credit you’ve used. The more credit cards you have, the more credit you have available. If you close one card, you’ll have less credit and can be at a higher risk of maxing out or overspending on your cards.
Closing a credit card can also have a negative impact on your credit age. The longer you’ve owned and paid off your credit cards, the higher your age. This is good for your credit score, because you have a long track record of paying off your balance. Avoid closing the credit card you’ve had the longest so you can keep a higher credit age.
If you still want to cancel, follow these 5 steps:
STEP 1: Ask, “Do I really need to cancel?”
If you have high fees and interest rates on your card, or if you find yourself overspending every month, closing your card could be the best way to save money and curb your spending habits. Otherwise, keeping your account open but not using your card is a way to avoid any potential damage to your credit score.
STEP 2: Redeem outstanding rewards
Make sure you’ve used or cashed out the rewards associated with your card. Cards have different redemption instructions, so check the procedure on your credit card issuer’s website so you’re not leaving free money behind!
STEP 3: Pay off your balance
You will not be able to close your card until you pay off your balance in full. If you want to make sure no other charges will be added to your account before you cancel, call your credit card and have your account frozen. Then you can clear your account and cancel the card without having to deal with outstanding payments or interest changes.
STEP 4: Call your credit card company
Now that you’ve taken care of clearing your card and accrued awards, it’s finally time to close it! Call your credit card company and confirm that your balance is zero. Tell the company you’d like to cancel your card and note that the account was closed a the “consumer’s request.” Then, ask your credit card company for written confirmation that your card was closed.
STEP 5: Send a letter to your card issuer
To cover all your bases, send a written cancellation letter to your card issuer. Make sure you include your personal information, as well as your credit card account number. Again, tell your issuer you’d like your credit report to say your account was closed at your request. There’s nothing wrong with being overly thorough and cautious when it comes to your credit!
Once your card is closed, be sure to monitor your credit score—but remember, it could take a month or more for your account to be fully closed. Any changes or dips in your score should be short-lived!