How to Cancel a Credit Card

So you’ve decided you don’t want your credit card anymore. You don’t use it and it just sits around in your wallet. Either that, or you’ve got spending habits that are out of control and you just want to pay off the credit card and close the account. After all, you already cut up the card, might as well close it too, right?

So now you decide to make the phone call to close the credit card account. You call customer service and ask them to “cancel your credit card.” They place you on hold for a while, then transfer you to the appropriate department. You speak with a specialist regarding the closure of your card.

They ask a few questions such as why are you closing the account, were there any problems, etc. You say no, and just try to rush the process along. After throwing some special offers your way, they finally concede and tell you the closure request has been processed and should be taken care of and noted on your credit report within 30 days.

But before you go through with it, it’s important to understand the implications of canceling your credit card.

Implications of Canceling Your Credit Card

First, if you plan on applying for any new credit shortly after or during the time of credit card closure, note that your credit score will likely drop as a result of canceling the credit card. You will essentially cut out “x” amount of available credit that the canceled credit card was contributing to your credit utilization. So if your credit card had a credit limit of $10,000, that’s $10,000 less that you have available. That diminishes your borrowing power, and drops your credit score, at least in the near term.

Not only that, but you’ll effectively kill your credit depth by canceling a credit card that may have had several years of positive credit history associated with it. Remember, most lenders want at least three lines of credit with two-year history on each. So if you only have new credit cards, you may run into trouble in the future when applying for a car lease or a mortgage.

Secondly, if you cancel your credit card with a balance outstanding, the creditor can charge you a penalty or raise your interest rate to the maximum available. So be sure you want to cancel the card before you tell any of the credit card representatives about your intentions.

If you aren’t carrying a balance, the opposite is true. Tell the creditor that you plan to cancel your credit card and watch the offers get thrown at you. Many creditors will offer lower APRs, better rewards, card upgrades and more, just to keep you as a client! Even if you plan on keeping your credit card, making a veiled threat is a great way to improve your benefits. Just make sure you don’t have a balance, or you could be penalized as mentioned above.

Document Your Actions

Remember to always keep documentation on hand, and ask for the name of the representative you spoke with. Take down any confirmation numbers they give you. Believe or not, many creditors have failed to cancel credit cards for members, and continue to send new credit cards. It’s just another way credit card companies keep their business going strong.  Also note that the credit cards can generally be reactivated within six months of cancellation.

Watch out for creditors, as they may attempt to fool or confuse you during this time to keep you as a client. Make sure you know your rights.

Keeping Credit Cards Open Can Be Helpful

I personally recommend keeping credit cards open if they’ve got decent lines of credit, no fees, contain lengthy clean payment history, and don’t have outstanding balances resulting in finance charges.

The total amount of available credit and the card history are good enough reasons to keep the card open. If you wish to pay off a card or avoid paying finance charges, try a credit card balance transfer. This allows you to keep the credit card open, pay it off completely, and avoid interest charges if you move it to a new, 0% APR credit card.

That said, don’t be afraid to close a credit card if you’ve got too many and they’re not being used.  Sometimes too many credit cards can lower your credit score and they can up your identity theft risk if not properly managed.

Read more: How many credit cards should I have?

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