Do you want to close your credit card account or cancel one of your credit cards? It is likely that you would be having one to two credit cards and may want to close one of them. There can be many reasons behind this, such as you may not be using that card, the card fees are too much for you, or the card is simply not doing any benefit to you. At such times, you may ask yourself how to close a credit card account.
Many people think that they can easily do this by snipping their credit card into two with a pair of scissors. However, this is not the correct technique to close a credit card account and you must cancel it the right way. The whole process of how to close a credit card account involves many specific steps that you must follow in order to cancel your credit card account the right way, so that your credit score does not hurt.
Reasons behind closing a credit card account
As said above, there may be many reasons as to why you want to cancel your credit card. Some of the most popular ones are:
- The card terms, like high interest rates, annual fees, etc. are not favorable any more
- The card is charging high interest rates
- Not using your credit card
- The annual fees of the card is quite high as compared to other credit cards
- To avoid excessive spending
- The card is costing you unnecessary money
- You are applying for a new credit card and opening a new account
- You may want to close an old credit card account after taking advantage of a big sign up bonus or a great balance transfer deal on a new rewards credit card
Apart from these, there can be many other reasons for closing your credit card. Although, in case of high interest rates, you can always call the specific issuer of the card and request to lower the interest rates or waive the annual fees on the basis of your creditworthiness; however, it is not necessary that the issuer will surely reduce it.
Before closing your credit card account
Before you ask yourself how to close a credit card account or decide to cancel your credit card, it is important that you know what effect it will have on your credit score. When you close your credit card account, the payment information related to your card still remains on your credit report. It does not mean that your credit report will delete your payment details after you cancel your card.
Closed credit card account that have zero balances, without any negative information usually stay on a credit history for ten years from when a card is reported closed. On the other hand, open accounts that have some positive data remain on the credit report for an indefinite period of time. This means that the positive information stays for a longer period of time as compared to negative data.This is because the negative data on your credit report, such as foreclosures and late payments, expire after sometime, which is typically after 7 years.
Moreover, the older the credit card account is, the better it is for your credit score. The age of a card account is important when it comes to the credit scores. This age is the time or duration in which the account remained open. A longer history with positive information is good for your credit report. Therefore, if you choose to close an old credit card account, it can prove to be negative for your credit scores.
How to close a credit card account
Now, have a look at our guide of how to close a credit card account. You can follow these steps and close your credit card account easily and quickly. However, you must remain patient and organized, if you want everything to go well.
- Pay the balance in full
You must pay your credit card balance in full. You can also transfer the balance on another credit card, if you find a card that has better balance transfer terms. You cannot close your credit card account till you pay the whole balance. Moreover, if you do not want to pay any more charges on your credit card and still have to pay the remaining balance, then you can contact your credit card issuer and ask him or her to freeze your account till you pay off the entire balance and close the account.
- Redeem your rewards
If the credit card account you want to close is a rewards credit card, then make sure that you redeem all the accrued rewards on your card. Planning ahead can help you to minimize the losses. For this, you must check the redemption procedures and rewards balance on the website of your card issuer. You can see if there are any accumulated points or miles on your card that you can take as a statement credit, if they cannot be applied to merchandise or travel.
Also, cash back credit cards usually have much easier redemption features. Nonetheless, some of them require you to reach certain spending limits or they only allow cash back redemption once a year. Therefore, knowing the redemption rules of your credit card beforehand will let you to plan how you can capture the accrued rewards before closing your card account.
- Contact the right person
In order to close your credit card account, you must contact the right person. For this, you must note down the mailing address as well as the customer service number of the issuer of your credit card and then call on that number. You can find the customer service number on the monthly statement of your credit card, the issuer’s website, and on your credit card. The mailing address is on the monthly statement and the website.
- Inform the bank or the issuer
Confirm that your credit card has nil balance. It is not necessary that since you have paid the whole amount on your latest bill, that your card balance will be zero. Interest may still be accumulated on your card between the time the bill was sent to you by the issuer and till you made the payment. This interest is known as the residual interest. And, once you are sure that your account balance is 0, inform the bank authorities of the card issuer that you are closing your credit card account.
These tips will surely answer your queries about how to close a credit card account and will help you to do the same.