How To Cancel A Credit Card

Published on: Sat, Sep 5, 2009

Classified as: Credit Cards, Credit Report, Credit Score, Tips & Advice

If you are not using your credit card any more, you may want to get rid of it. Or maybe you’ve got spending habits that are out of control and you just want to pay off the credit card and close the account. You have already cut up the card, might as well close the account too, right?

cancel credit card

Canceling your credit card

When you have made your decision, you call the credit card company, to ask the customer service representative to cancel the credit card. He may transfer you to the appropriate department, where you speak with a specialist regarding the closure of your card.

They ask a few questions regarding the reason why you are closing the account, were there any problems, etc. You simply tell them the reason and after throwing some special offers your way, they finally concede and tell you the closure request has been processed and should be noted on your credit report within 30 days.

Implications of canceling your credit card

Although you may have made the decision keeping some points in view, But it’s extremely important to understand the implications of canceling your credit card before you go through with it.

Your credit score may drop

First of all, remember that your credit score will most likely drop as a result of canceling the credit card, in case you plan on applying for any new credit shortly after or during the time of credit card closure.

By canceling your credit card, you have essentially cut out whatever amount of available credit that the canceled credit card was contributing to your credit profile. For example, if your credit card had a credit limit of $10,000, you will now have $10,000 less that before. This reduces your borrowing power, and drops your credit score, at least for some time.

Your credit depth will be affected

Moreover, if you have had the card for a long time, you’ll be killing your credit depth by canceling it, as it may have several years of positive history associated with it.

Keep in mind that most lenders want at least three lines of credit with two-year history on each. Thus, if you only have new credit cards, you may face quite some trouble when you apply for a car lease or a mortgage in the future.

Creditor can charge a penalty if you have outstanding balance

Be very sure that you really want to cancel the card, before you tell any of the credit card representatives about your intentions, because the creditor can charge you a penalty or raise your interest rate to the maximum available, in case you have any outstanding balance on your card.

But if you don’t have any balance, the opposite will work for you. The credit card company might throw great offers at you, such as lower APRs, better rewards, card upgrades and more, just to keep you as a client!

Ask for the representative name and keep the confirmation number

Remember to ask the name of the representative you speak to and note down any confirmation numbers they give you. Many creditors don’t cancel credit cards for members, and continue to send new credit cards. It’s just another way sleazy credit card companies keep their business going strong.

Also note that the credit cards can generally be reactivated within six months of cancellation.

Conclusion

Keeping credit cards open is generally recommended, if they’ve got decent lines of credit, charge zero fees, contain lengthy clean payment history, and don’t have outstanding balances resulting in finance charges.

However, if you’ve got too many cards which are not being used, then it is better to cancel some as sometimes, too many credit cards can lower your credit score and increase the chances of identity theft.