What you need to know about canceling your credit card.
Whether you’re upgrading to a new credit card, getting a balance transfer or simply reducing the number of cards in your wallet, there comes a time when you need to cancel a credit card. But it’s not quite as simple as cutting your card in half. We go through how to properly cancel a credit card, how to contact the providers, what to consider and how it could affect your credit.
How to cancel a credit card without calling
How to properly cancel your credit card
Follow these steps to cancel your credit card successfully:
- Pay the outstanding balance. If you try to close an account with an outstanding balance, the bank could increase the interest rate or demand full and immediate payment. If you plan on transferring your balance to a new card, wait until the transfer has gone through before your close the card.
- Transfer any reward points. If your card offers rewards, redeem or transfer them to another eligible account before you request to cancel the card. Once you close the account, all unclaimed points are forfeited.
- Cancel direct debits. To prevent reactivating your card, cancel all existing direct debits linked to your credit card. Even if you’ve requested for an account to be closed, a direct debit can reactivate a canceled card.
- Cancel your credit card online. Every credit card provider offers their own way of canceling credit cards online (some more difficult than others).
- Cancel your card. Once you’re ready to cancel your card, the provider will either required you to call directly or cancel online. Most providers want to talk to you to offer lower APR or annual fees to get you to stay with them. So if you’re dead set on canceling the cards, be ready to stand your ground. Once you cancel, make a record of the date, time, and name of the representative you speak with.
- Cancel your card in writing. Other providers make it even harder to cancel by requiring that you send a written request. Ask for the address over the phone, and include your credit card number and account number in the letter. You should receive a letter confirming the closure of the account.
- Check for future statements. Try to log into your account or go through your credit card statements following your request to make sure that the card is definitely canceled.
- Destroy your credit card. Cut the card into tiny pieces to make it impossible for anyone to piece it back together. You can even discard the pieces at different times or places.
- Confirmation. You should receive a cancellation confirmation by mail. If you don’t, follow up with your lender using details from your first phone call.
Calling to cancel
The phone number on the back of your credit card is usually a good bet, but here are details for contacting the major card companies to cancel your card:
Here are how a few major credit card companies let you cancel online.
- Chase. Use its secured message center to cancel your credit card online.
- American Express. Use its Live Chat functionality on site. It typically appears as a question mark in the corner of your screen.
- Barclays. Use its Contact Us form.
- Citi. Use its Messages form.
What else should I consider?
Here are a couple other things to consider before you close your account:
- Annual fees. Check when your annual fee is charged and if it will affect your final payment.
- Applying for a new credit card. If you plan to apply for a new card, know that applying too many times can have a negative impact on your credit history.
- Bad credit. Poor creditworthiness is bound to affect your ability to get a credit card in the future. So if you have a lot of debt, you may want to hold off. Instead, focus on paying down your other debts. If you keep the balance at $0, it can help your credit.
Expert advice on canceling cards and your credit report
We spoke to Katherine Craig, Public Relations Manager of Equifax, to get insights on how canceling a credit card could affect your credit report. She says your priority should be settling outstanding payments on your account before you go to close it so that you can avoid default listings. “If you have a default on your credit file, it is a smart thing to pay the debt. Your credit report will then record the default as having been paid (and the date on which it was paid). It may impact your ability to get credit or get it at the most valuable price, but it is certainly better than leaving it unpaid.”
So what about canceling one card and applying for another? If that’s your goal, Katherine recommends limiting your applications to reduce the impact on your credit rating. “Credit reports don’t show the type of credit, or whether it was granted or taken up, what your current credit limit is or if it is now closed. However, too many applications for credit can impact a lender’s view — it may actually appear to the banks that you have a lot more active credit commitments than you do.” If you’ve submitted too many credit card applications in the recent past, Katherine suggests that you wait from three to six months before applying again.
How else will canceling my credit cards affect my credit?
Canceling your credit card can be good if you’re looking to control your spending and get a better grip on your budget. But before you make that move, consider how it can affect your credit.
Just because you cancel a credit card, your payment information doesn’t disappear from your credit report. That can be both good news and bad. If you’ve made late payments or have any other negative information on your credit card, that data stays on your credit report for seven years. If you’re closing an account with positive account history, positive credit data stays on your credit report for 10 years from when the account is closed. This allows good credit information to stay longer than negative, giving you the change to improve your financial situation.
Credit utilization ratio
Another way that closing your credit card can affect your credit score is changing your balance-to-limit ratio or credit utilization ratio. Credit bureaus are interested in your total credit available and how much of that you’re using. A low ratio is a strong indicator of a good credit risk.
So closing a credit card with a high spending limit and a zero balance could hurt your credit score, especially if you have high balances in other cards or loans. If you want to cancel your card because of an annual fee, offset the ratio by either requesting a credit limit increase on another card or paying off balances on other cards.
Age of your credit card
When it comes to your credit cards, age matters. The amount of time your credit card has been open affects your credit score, and is beneficial if you have a positive credit history. So closing that credit card you’ve had since college can actually hurt your score if you have a positive payment history.
What should I do if I’m not happy with my credit card?
If you’ve got a credit card that’s not working for you anymore, you may want to find one that’s more suited to your needs. There are so many credit cards on the market with no annual fee, low APRs, rewards and frequent flyer miles and 0% balance transfer offers. Compare credit card offers to find a better option for you.