How to Cancel a Credit Card – Closing Credit Card Accounts
There are two main reasons a person thinks they should cancel their old credit cards, but neither provides an absolutely definite benefit and can be common misconceptions.
First, you might think that canceling unused credit cards could improve your credit score, but we’ll also explain why this isn’t always the case and why you might want to keep your old credit cards. .
Second, you might also think that if you cancel a credit card it could open up a range of “new credit card offers” as old credit cards may prevent you from taking advantage of them.
If you’re concerned about your credit rating, use the table below to compare credit reports from major credit reporting agencies, or read on to see how unused credit cards affect your credit rating.
How to cancel a credit card
It might seem obvious, but slicing your credit cards into small pieces with a pair of scissors will do nothing but stop you from using your credit card.
In order to properly close a credit card account, you will need to phone the customer service department of the credit card provider. If your card comes with an annual fee, you will be charged the fee until you cancel the card with the card provider. Simply cutting off the card and not using it for a long time will not cancel the charge. Don’t assume that simply stopping using the card will tell the card provider that you want to cancel it.
This number may appear on the back of your credit card, so don’t be too quick to cut your card in half as you might end up browsing their website for the phone number and have a hard time remembering your card number. .
It might be symbolic, but cutting your credit cards in half doesn’t mean you’re canceling them.
Once you confirm with the credit card provider that you want to cancel your account, your account may remain open for a few more days, as credit card transactions are not always completed immediately.
Check your final statement again, as some payments you made before the cancellation may not appear on the statement after you decide to cancel.
If in doubt, call again later in the month to verify that your credit card balance is fully cleared. It doesn’t hurt to be 100% sure the card is paid for and ready to be canceled.
Why should you cancel a credit card?
Canceling your old credit cards may offer more benefits than improving your credit score.
Many credit card providers don’t like losing customers, so you may find that some will offer you bonuses or additional benefits in order to keep your custom.
It’s worth listening to the offer to stay if there is one, but consider whether the credit card will still have a place in your wallet.
If you have no interest in using the credit card again, then having it there to collect dust may not work for you in the long run.
If you don’t have any debt and your credit score is in good shape, you might still want to consider the benefits of canceling your credit card. This could increase your chances of being approved for a credit card as a new customer.
As a result, you could get a range of rewards that are only available to new customers.
If a purchase you made on the card is refunded after you cancel the card, don’t worry. Your card provider will contact you to arrange a refund – they are obligated to provide you with these funds even if you have already canceled the card.
Cancellation of a credit card for the new customer offer
Another possible benefit of canceling your credit card is that it could allow you to be reconsidered by the same credit card provider as a “ new customer. ”
This means that as a new customer you would be entitled to new customer offers and bonuses when purchasing a new credit card.
The problem with an old credit card is that it’s likely that all of your new customer benefits have expired and you’re just using basic credit card functionality.
There is no general rule of how long it takes before you can cancel to become a new customer again, so check your credit card provider’s website for details.
Some credit card companies will exclude you from new customer offers for 24 months after your cancellation (in the case of American Express), while others will only give you a month’s refund.
Typically, the credit card providers with the best deals for new customers will make you wait longer after your cancellation as these perks include features like extra-long balance transfer offers or a high refund rate. . While it would be great if you could earn a new customer deal every six months, some card providers will make you wait a long time rather than giving out bonuses consistently.
Continuous checking of your score can help you break down bad habits and improve your chances of accessing better financial products on the market.
See the table below to compare paid and free credit reports from major credit reference agencies.
Do unused credit cards affect my credit rating?
The answer to this question isn’t definitive anyway, but the short answer is: probably.
If you have a lot of unused credit cards, many lenders will see this as a sign that you are not spending money on credit. This means that you have no debt repayment history.
Your credit report has a history of paying off debts and it shows lenders that you can handle paying off the debts. They may also worry that you have so much credit on hand that you could spend all at once and reduce your chances of being able to pay it back on time.
Likewise, if you spend most of your credit limit on just one credit card, providers might see it as a sign of desperation. As a general rule of thumb, you should try to avoid using more than 70% of your credit limit all the time.
If you have more than one credit card, you may want to spread your spending across them so that you don’t run out of your limit on one credit card. Unless you have a good organization, it can be difficult to keep track of all those cards, and you might be stung that you will be charged an annual fee for a card that you really should have canceled but forgot to do.
Basically, if you have too many credit cards, you should probably close a few, but you don’t have to close them all.
And if you’re using a credit card to the max, but you’re not in desperate need of credit, you should try using your other old credit cards to spread your overall spending.
This could improve your credit score or prevent it from appearing to creditors that you desperately need credit.