How to Cancel a Credit Card (and When to Do It)
For the most part, you will rarely have to cancel your credit card . But let’s say that, for one reason or another , you decide to cut back on what’s in your wallet and simplify your card life. Canceling a credit card may seem like a simple process, but it’s important to approach it thoughtfully.
Before you decide to close your account, consider the potential consequences and follow these steps to cancel your credit card in the smartest and safest way.
Consequences of canceling your credit card
Before canceling your credit card, it’s important to understand the potential consequences. Closing a credit card can affect your credit utilization ratio and the average age of your credit accounts, potentially lowering your credit score. You may lose rewards points, cashback or other benefits associated with the card. Additionally, a credit card can serve as a financial safety net in emergencies, so consider whether you’re comfortable losing this backup option.
If you’re considering canceling due to high fees or lack of usage, consider some alternatives before taking the final step. You may be able to switch to a no-fee card from the same issuer. Alternatively, try to negotiate better terms with your card issuer – they may be willing to waive fees or offer higher rewards to keep you as a customer. If these options don’t work, you can keep the card but use it sparingly to preserve the score and its positive impact on your credit history.
When should you close (or not close) a credit card?
Before you start canceling, consider these three important questions:
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Is there an annual fee? If you’re paying fees for benefits you don’t take advantage of (like rewards opportunities, insurance coverage, or free upgrades), there’s probably no good reason to keep that credit card in your rotation. Consider whether the card’s benefits outweigh its costs.
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Does he have a high credit limit? You don’t want to hurt your credit score by closing a card that will dramatically reduce your overall credit limit. This taints the credit utilization portion of your credit score. If you close a credit card but have balances on other cards, you’ll likely see your score drop by as much as 50 points. A high credit limit is not a reason not to close your card, but you do need to be strategic about it.
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Is this your oldest credit card? A card you’ve had forever improves your credit score by increasing the overall age of your credit history. If you close it, you’ll probably see your score drop, but probably not by more than 20 points. If possible, consider keeping your oldest card active, especially if it doesn’t have an annual fee.
Steps to cancel your credit card
If you’ve weighed all your options and still want to proceed with cancellation, follow these steps to make sure you do so the smart way:
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Pay off your balance : Make sure your card has a zero balance before canceling. If you want to get rid of your card as soon as possible but can’t pay off your entire balance at once, consider transferring your balance to a card that has a 0% balance transfer offer.
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Redeem your rewards : Redeem or transfer your remaining rewards points or cash back. If you have multiple cards that use the same rewards portal (such as multiple Chase cards or Capital One cards ), you can skip this step. But keep in mind that you’ll likely only be able to redeem your points within the limits of your remaining cards. Before closing your card, double check your card issuer’s policies.
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Cancel automatic payments . Update all recurring payments associated with your card so you don’t miss any important payments.
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Contact the issuer : Call the number on the back of the card to begin the cancellation process. We know this step can be inconvenient, but it is usually necessary. You may be able to close your card online via chat, but chances are you’ll have to speak to a human representative. Confirm with the agent that your balance is zero. If you have a high credit limit and don’t want to lower your credit utilization ratio, ask if you can transfer your limit to another card from the same issuer.
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Request written confirmation : Request a written statement confirming the account is closed and the balance is zero. Your card issuer should send you a letter confirming that your account is closed and has a zero balance. If you don’t receive it within a week or two, you can call the card issuer or send an email asking them to confirm your cancellation request.
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Next Steps : Check your credit report after a few weeks to make sure the account is listed as “closed by consumer.” It can take up to 45 days before your card closure is reported to the credit bureaus, meaning it could take you almost two months to see any change in your score.
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Card disposal : Cut the physical card, destroying the chip and magnetic stripe . If your card is metal, don’t cut it! Contact your issuer for proper disposal instructions.
Additional Security Measures
To further protect yourself, keep a record of your cancellation request and confirmation. Keep your cancellation confirmation for several years in case you need to refer to it. Continue to monitor your credit report for any unexpected activity. Be prepared for a potential counteroffer from the card issuer and decide in advance whether you are willing to negotiate.
By following these steps, you can cancel your credit card in a way that minimizes the negative impact on your financial health and protects your personal information. Remember that canceling a credit card is a big financial decision, so take the time to consider all your options before proceeding. Closing credit cards is not something you should plan to do on a regular basis, but if your situation requires closing, you can repeat these steps as needed.