Whether you are upgrading to a new credit card, getting a balance transfer, or are simply reducing the number of cards in your wallet, there comes a time when you need to cancel a credit card. But it is not quite as simple as cutting your card in half.
Follow these steps to cancel your credit card successfully:
Pay or transfer the outstanding balance. If you try to close your account with an outstanding balance, the bank could increase the interest rate or demand full and immediate payment. If you plan on carrying out a balance transfer, you will need to include details of your previous account in the application and close your account after the transfer is complete.
Transfer any reward points. If you have any existing reward points on the card, redeem them for rewards before requesting the cancellation of the card. All unclaimed points are forfeited when you close your account.
Cancel direct debits. Make sure you cancel all existing direct debits linked to your credit card because a direct debit can reactivate a cancelled card, even when you have requested the account closure.
Call to cancel your card. Once you have paid your outstanding balance and claimed your reward points, call your card provider’s customer service department to inform them of your decision to close the account. Some card providers may agree to cancel your card over the phone by confirming your identity, while with others you may be required to send a written request. If you have to send a letter, confirm the postal address over the phone. If you cancel the card over the phone, make sure you make a record of the date, time, and name of the representative you speak with.
Cancel your card in writing. If you need to send a cancellation request in writing, include your credit card number and account number in the letter and state your request for the card provider to close the account. You should receive a letter confirming the closure of the account, so make sure you keep this information safe in case there is a dispute in the future.
Check for future statements. Try to log into your account or go through your credit card statements following your request to make sure the card is definitely cancelled.
Destroy your credit card. It is recommended that you cut the card into tiny pieces to make it impossible for anyone to piece it back together. If you are feeling extra cautious, discard the pieces at different times or places.
Confirmation. You should receive cancellation confirmation by mail. If you don’t, follow up with your lender, using the details from your first phone call.
What else should I consider when cancelling my credit card?
If you are planning to close your credit card account, make sure you also consider the following factors before you take action.
Annual fees. Check when your credit card annual fee is charged and whether this will affect your final payments, when you plan to close your account.
Applying for a new credit card. If you plan to cancel one card and apply for a new one, please be aware that applying too many times can have a negative impact on your credit history.
Bad credit. Poor creditworthiness will affect your ability to get a credit card in the future. So, if you already have a lot of debt, you may want to hold off on cancelling your card while you focus on paying off your debt. As well as giving you immediate access to credit if you need it, this strategy may help improve your chances of approval for a new card down the track.
Expert advice on cancelling cards and your credit report
We spoke to Katherine Craig, Equifax’s Public Relations Manager, to gain insight into how cancelling a credit card could affect your credit report. She says your priority should be settling outstanding payments on your account before you close it so 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 cancelling one card and applying for another? If that is 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 have submitted too many credit card applications recently , Katherine suggests you wait around three to six months before applying again.
What should I do if I’m not happy with my credit card?
If you have a credit card that is not working for you anymore, you may want to find one more suited to your needs. There are many types of credit cards in the market including no annual fee, low rate, rewards and Airpoints cards, as well as those with purchase rate and 0% balance transfer offers. Once you find a card that you are happy with, you can apply for it and cancel the old card.
Commonly asked questions about cancelling a credit card
There are many reasons people cancel a credit card. Some of the most common reasons you might want to cancel your card include:
The introductory interest rate offer or $0 annual fee period is about to end.
You want to cut down on your interest charged.
You are not using the benefits of the card (rewards, complimentary insurance etc) and are paying a high annual fee.
You have lost your card or suspect it has been stolen.
You don’t want to be tempted to spend more than you can afford.
Whatever the reason, it is important you cancel your card in the correct manner. If your current credit card hasn’t met your expectations, you can also compare and find a card that suits your needs.
This is possible in some cases. Get in touch with your card provider and explain your circumstances to arrange a solution that works for you.
Yes. If your credit card attracts an annual fee, you still need to pay it as long as the account remains active.
Each time you apply for credit or close a credit account, it shows on your credit file. While lenders might view too many listings as a risk, closing two accounts to minimise available credit should not affect your credit score negatively. Just remember to close the accounts properly so that there are no outstanding debts on either of the cards.
If you haven’t formally initiated the process to cancel your card, you can call your credit card provider to ask for a replacement card.
Alison is a New Zealand associate editor for finder. As an editor and proofreader, Alison has found an outlet for her love of the written word. As well as constantly reading, Alison can be found caring for her menagerie of animals in her spare time.
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