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Knowing how to cancel a credit card can be extremely tricky if you are not aware of the steps associated with it. It is a process that requires pre-planning and careful consideration of every little factor. But do not stress! We will break down every step for you!
To narrow down the process, it has been divided into 5 Steps:
Pay off the balance
Call the issuer’s customer service
Send a letter of cancellation
Investigate your credit report
Dispose of the card
Should You Cancel Your Credit Card?
Typically, it’s not recommended to cancel a credit card as it could negatively impact your credit score. However, closing a credit card may be beneficial if you face a high annual fee or interest rate. To ensure that closing your oldest credit card is a wise decision, take some time to consider it and make sure you have a valid reason for doing so.
In addition, it’s crucial to understand what you’re getting into first. Let’s review some factors to consider when considering canceling a credit card and how it could impact your credit.
Issues Associated With Cancellation
Unless you face certain circumstances, as stressed before, it is rarely advisable to cancel a credit card as it can backfire in some ways.
The five ways in which cancellation of a credit card can do more harm than good are:
Leftover Perks That Are Unclaimed
When you cancel a credit card, you lose access to all of its perks, including rewards programs, cashback deals, travel advantages, and insurance coverage, losing all your credit card rewards.
Loss of Credit
Your available credit limit is decreased when you cancel a credit card. It may lower your total credit capacity if the card you’re canceling has a big credit limit. Having balances on other cards may affect your ability to make more significant purchases or maintain a lower credit utilization ratio.
Impact on Credit Utilization Rate
Canceling a credit card can increase your credit utilization ratio if you have outstanding balances on other cards. A higher credit utilization ratio can negatively impact your credit score. It’s essential to manage this ratio by paying down balances or transferring them to other cards if needed.
Impact on Credit Scores
Canceling a credit card may have an impact on your credit score. Closing an account decreases your total available credit, which might boost your credit utilization percentage if you maintain balances on other cards. A higher credit utilization ratio, as discussed before, may negatively influence your credit score and credit reports.
The variety of credit accounts you have, such as credit cards, mortgages, and auto loans, is your credit mix. Having several credit card accounts and a diverse credit mix is generally viewed positively by lenders because it demonstrates your ability to responsibly manage different types of credit. Your credit mix may be affected if you close a credit card account. Therefore, you should give closing your card serious thought before doing so.
However, do not worry! If you need to cancel a credit card, we will ensure you are well-guided before leaping and facing minimum payment issues.
Let’s discuss the reasons why a credit card should generally be canceled.
Reasons For Cancellation
Several reasons can justify the need to close a credit card. Here are some circumstances where canceling and disposing of your credit card might be better.
Separation or Divorce
Terminating any joint accounts you have with your spouse is usually advisable as soon as the divorce process gets underway. You’ll still be responsible for any charges to your credit card as long as that account is active.
An unprepared divorcee may incur a hefty fee due to an angry ex who racks up enormous debt and flees. Even if a split is amicable, there is still a shared obligation and the right to make tiny daily demands without malice.
High Annual Fees & Interest Rate
The best reason to cancel a credit card is if the fee you are being charged is too high. This can be a troublesome factor, especially for people with multiple credit cards.
Another reason for canceling a credit card is the high-interest rate on it. If you cannot afford to keep up with the rate mentioned, you should close the credit card immediately by following our instructions closely!
Low Rewards & Perks
Another factor that can be considered for the cancellation of a card is a lack of rewards or perks available through it. If you are not getting much out of it, you can decide to cancel it at any time, albeit carefully, by following every guideline.
Step By Step Guide
We have stressed the factors that should be considered before making the leap and canceling the card. Now that you are well-informed and still keen on canceling a card, you may wonder about its associated process. Before diving into the process, we have another factor to talk about.
Cancellation Of A Credit Card Demands Energy
You cannot merely snap your card in half or call the bank branch you are associated with and ask them to cancel it. We wish it were that simple!
To cancel a card, you must be wholly present and invest your time and energy in the process. Depending on your service providers, you may have to make a certain number of phone calls and write a certain number of emails or letters. In addition to this, you may also have to check on your credit status a certain amount of times. You also have to plan and follow a layout of the entire process, incorporating some of the steps into your respective schedules.
We do not mean to scare you from the massive task demand, but we want to inform you that this process cannot be completed in one sitting, so you should brace yourself for that beforehand!
1. Pay Off The Balance
Firstly, you need to ensure that the payable amount in your credit card account is cleared. If your score is not zero, it can be viewed as if you did not balance your credit card balance score, which can eventually negatively impact your score. Repay every penny on your credit card debt, and ensure that you have collected the perks or benefits by attaining every credit associated with your card.
It’s usually not a good idea to cancel your credit card early if it includes an annual fee. If possible, wait until right before the yearly charge posts to your card’s account. Most banks and credit card providers offer a grace period when you can cancel the card and still receive your annual fee refund of at least 30 days. Following the posting of your yearly fee, you have the option to contact your credit card companies for a potential retention offer.
Along with this, you also need to ensure that you move your subscriptions, et cetera, to another card. If you do not proceed with this step, you may lose valuable information and have to redo subscribing to a new card or change the information to another card. It is recommended to do this step before canceling your credit card so that you can sort out any unforeseeable errors beforehand. Check that your score is zero before proceeding to the next stage.
2. Call The Issuer’s Customer Service
You need to get in touch with your credit card company. This should preferably be done through a call. We recommend a call rather than an email to articulate your request clearly, clear any issues you have, and get a logical sequence of steps by the issuer, all in the space of one call. This is more time-efficient and a better way to get reliable information. Of course, you can also mail according to your preference, but a verbal request and information gathering are better.
When you call the provider, you need to ensure that you communicate your details and be stable in your decision. The service provider’s job is to talk you out of your choice by offering you alternatives. If you like an offer, you can respond to it and grasp the deal, but if not, then proceed by declining and sticking to your request for credit card cancellation.
Please ensure that the person you talk to gives you all the steps of the process and tells you when each step will likely take place (give you a rough outline of how long all the steps will take). Also, ensure you get information about the person you communicate with, namely their name or position.
Last but not least, get a mailing address from the service provider.
The mailing address is essential if the verbal request goes astray or is forgotten. This way, you will also have solid proof of having sent a request. It’s also more professional this way!
3. Send A Letter of Cancellation
Once you have the address, write a simple letter to your credit card company about canceling your credit card with your details. Include your name, address, phone number, account number, and the specifics of your conversation with the bank person, along with the statement that you want the account “closed at consumer’s request” and to be closed. Additionally, you can request formal proof that your account has been canceled with a $0 balance.
Additionally, you can request a follow-up to ensure all details match your needs.
Having done this, you need to monitor or track your letter to ensure it reaches the destination promptly. You can also use this as proof if there is any delay in the cancellation of your card.
4. Investigate Your Credit Report
It is not easy to check whether a card has been a closed account right away because it is a lengthy process. However, even if the time has exceeded the tentative outline, try to be patient or contact the bank.
First, request your free credit reports from Equifax, Experian, and TransUnion once a year at AnnualCreditReport.com or by phone to go through your credit reports. Then verify your personal information and look for errors related to your account details, balances, payment history, and public records. Contact the credit bureau that provided the report to initiate a dispute if you find any inaccuracies or errors. Provide specific information and supporting documents.
Regularly monitor your credit reports for changes or potential fraud. Consider using credit monitoring services or tools provided by financial institutions.
You must check your credit balance afterward, however. Make sure the status reads canceled by the consumer! This way, your score will not be impacted negatively. You can check your score through a handful of services for free online. We recommend you use a reliable source and have some backup research on this aspect too!
5. Dispose of The Card
With everything now said and done, you can safely rip apart your credit card. Make sure to cut it well or use a shredder; it will make the job easier. Disposing of the card ensures anyone can no longer use it, and you can now stay assured that its existence has been wiped off.
And that’s it! The process is now complete with this final stage.
Keep the Card Open
Instead of canceling the credit card, you can keep it open with a zero or minimum balance. This allows you to maintain the available credit limit and length of credit history associated with the card, which can positively impact your credit score. Be sure to use it occasionally so it doesn’t get closed by the company.
Negotiate With the Issuer
If the primary reason for canceling the card is an annual fee or unsatisfactory terms, you can contact the credit card issuer and negotiate better terms. They might be willing to waive the annual fee, offer additional benefits, or switch you to a different card within their product portfolio.
Downgrade The Card
Some credit card issuers allow you to downgrade your existing card to a no-fee or lower-tier card within their lineup. This way, you can maintain the account history and credit limit while avoiding annual fees or unfavorable terms.
Debit Cards Over Credit Cards
If you opt for the cancellation of your card, you may want to look at the aspects that make a debit card more appealing to spend money than a credit card. Perhaps this can be your next step after the rocky security of a credit card.