It’s been sitting unused in your wallet for a long time. You’ve decided to free up some space. Now you need to know how to cancel a credit card. Closing a card will inevitably affect your credit and could possibly lower your score. So before breaking out the scissors, there are a few things you should think about before closing your account.
Things To Consider Before Cancelling Your Card
Does the card have an unpaid balance? It needs to be paid in full before closing the account. Plan on paying the card off before making the call.
– Length Of Activation
How long has that line of credit been active? Older is better when it comes to this. If you’ve had the line of credit for some time, or if it was your first credit card, you may want to keep the account open.
– Are You Paying A Fee?
You pay the fee, yet the card never leaves your wallet. If that’s the main reason you have for closing the account, you may want to reconsider. Call the company. Let them know that you are considering cancelling the card and they may waive the fee. They may also offer to raise your credit limit as well in an effort to keep you as a customer. These added benefits may sway your decision to close the card.
– Unused Points
You’ve spent the money. You’ve earned the points. You may as well use them. Don’t lose what you’ve accrued with a hasty decision. Most credit cards offer a rewards program. These can be cashed in for products and even trips if you’ve spent enough. Check over your balance and see what’s being offered for the points you have. Many reward cards offer a cash-back option where points are traded for a reduced balance. This may be your best option if you plan on closing the card. Even if your reward card doesn’t have this option, call the company and ask what they can do for you regarding your unused points.
– Will It Affect Your Credit Score?
Credit utilization is a big part of what gives you your credit score. How much credit you have available versus how much credit you use has a big impact when credit companies grant you your score. According to credit experts, using more than roughly a third of your total available credit could negatively impact your score. This is important to remember when considering cancelling a card. Closing an open line of credit will inevitably lower the total credit you have available. This will raise the percentage of total utilized credit should you have balances. If you don’t have much credit available to you, keeping the card open and maintaining a low (or possible zero) balance will positively affect your credit score.
Make The Call
You’ve considered all of your options and have decided that it’s time to cancel the card. This should be done over the phone with a live person. This won’t be difficult. The company should take care of it for you right away. Be prepared for them to offer you incentives to stay.
– Monitor Your Credit Report
It may take several days or even weeks before the cancelled card is off of your credit report. Monitor it closely and watch for changes. If the card is still on the report weeks later, call the company again and consider coupling this with a written request.
– Destroy The Card
Even a cancelled card can be enough for a thief to gather information on you, so just tossing the card in the trash is not an option. Take a large pair of scissors and be sure to cut along all the sensitive information including your name, the card number, and the magnetic strip. If you have a shredder that can handle plastic, go ahead and toss it in.
If you’ve considered everything and decided it’s no longer needed, it’s important to know how to cancel your credit card the right way. Understand the impact that it could have on your finances.