Are you wondering what the best way to close a credit card is? With so much information out there, it can be difficult to know what the right move is. But there is a right way to go about closing a card that can help you avoid potential pitfalls. Keep reading to learn what the best way to close a credit card is. Keep reading to see how you can get personalized offers from our trusted partners through MoneyLion!
Consider the potential impact of closing a credit card
Closing a credit card can have a variety of impacts on an individual’s credit score, so it is important to be aware of the potential consequences before closing a card.
One of the main impacts of closing a credit card is the decrease in the amount of available credit. Reduced available credit decreases your credit utilization ratio. The credit utilization ratio is the amount of debt owed divided by the amount of available credit. This ratio greatly impacts a person’s credit score. A borrower with a high credit utilization ratio is generally considered risky and so closing a credit card could lead to a lower credit score.
Another way closing a credit card can negatively impact your credit score is if you have had the card for a long time. Length of credit history is one of the factors used to determine your credit score and closing a card that has been open for many years can significantly reduce this factor.
Closing a card could also result in a decrease in the total number of accounts you have on your credit report, which could lead to a decrease in your credit score.
It’s important to consider the potential impact of closing a credit card before making a decision. If you are carrying a large balance or paying a high-interest rate, it may be beneficial to close the card to save money and improve your credit score. But if you are closing the card because you don’t need it or don’t use it, it may be best to keep it open and take advantage of the credit limit and rewards it provides.
Understand the process of closing a credit card
When it comes to closing a credit card, it is important to do so in the most efficient and responsible manner possible. Here’s what you can expect during the process of closing a credit card.
1. Review your credit card balance
Take the time to review the outstanding balance on the account and determine the most responsible way to pay it off. If you have a balance, you must pay it off in full, as this can help to maintain your credit score.
Not paying off the balance in full will likely result in late payment fees and a lower credit score. You also may not be able to close the account if you still have a balance.
You should also review the terms and conditions of your card to determine whether there are any reward points, cashback, or other incentives that may have accrued while using the card. If applicable, try to use these rewards or cashback before closing the account.
2. Cancel automatic payments
Make sure all automatic or scheduled payments associated with the credit card are canceled. This can prevent automatic deductions from your account and simplify your finances.
You’ll also want to notify any providers you regularly pay with your credit card that you’re closing the account. If possible, direct new payments to another credit card, debit card, or any other account you leave open.
3. Contact the credit card issuer
When you contact the credit card issuer, make sure you have an accurate account number and other information ready. Be sure to clearly explain your desire to close your account and ask whether there are any fees associated with doing so. Request written confirmation of the account closure.
4. Monitor your credit report
Once you have contacted the card issuer, you should also review your credit report to make sure the account is listed as closed. This is important because if the account remains open, it could negatively affect your credit score.
The closure of the card should be automatically reported to the credit bureaus. If you’d like to notify them yourself, you can send them letters. Doing so can help ensure the card will be closed on the credit reports and help keep your credit score in good standing.
If the account is still reported as open after being closed, contact the issuer to get the issue resolved.
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5. Verify the credit card is closed
Once you have verified your credit card has been closed, keep your credit card in a safe place and shred any documents related to the account to prevent identity theft. You may also wish to shred the card and receipts associated with it to ensure that no further purchases can be made. At this time, it may be wise to update your budget to reflect the change in your available credit.
When Closing Your Credit Card, Do So Cautiously
It is important to take the time to close your credit card responsibly and make sure that it is reported as closed to the credit bureaus. Doing so can help ensure you have a positive credit score and can help you get access to future financial opportunities.
FAQ
How do I close a credit card?
You must contact your credit card issuer directly to close your credit card. You will need to provide them with your account details to confirm that you are the cardholder.
What happens when I close a credit card?
Closing a credit card will reduce the amount of available credit you have, lower your overall credit limit, and reduce the average age of your accounts.
How long does it take to close a credit card?
It usually takes about seven to 10 business days for a credit card to be officially closed.
Is there a fee to close a credit card?
Most credit card issuers do not charge a fee to close a credit card. Some may charge a fee if you do not have a zero balance.
Is it a good idea to close an old credit card?
Closing an old credit card can have a negative impact on your credit score because it may lower the average age of your accounts. But if the card has an annual fee or a high-interest rate, it may be beneficial to close it.
