How to Close a Credit Card Correctly
Experts suggest keeping credit cards open, but there are certain instances when it is smart to close them, too. For example, you may have too many credit cards, your issuer raised your interest rate or added an annual fee, or you just want to take that credit card off your wallet. Whatever your reason, what matters is that you close your credit card correctly. Take the steps below to make sure you do it in the right way.
1. Check if your credit score will take a hit.
The length of your payment history is important in maintaining a good credit score. How old is the credit card you are thinking of closing? If you close a card that has been opened for many years and keep cards that you have had for only a year or so, your credit score might take a hit. Lenders want to see a consistent track record of maintaining a good relationship with creditors. Also, note that closing a credit card does not remove it from your credit report. Your payment history, positive or negative, will remain. Having said that, if you had recent late payments on the card, keep it open for some time with a zero balance to show positive credit history, then close it.
2. Pay your balance first.
It is possible to close a credit card even if you still have a balance, but it is not a good idea. Your credit utilization will rise and your credit score will dip. Pay off your balance first to lessen the impact on your score. Besides, you will still have to make regular monthly payments until you clear the balance. If you cannot afford to pay off your balance and you are still eager to close the credit card, consider transferring the balance to another credit card without any used credit or one with a promotional interest rate.
3. Maximize your credit card rewards.
Do not close your credit card until you use up all the rewards you have earned. Check your rewards balance, redeem everything available to you, then proceed with closing.
4. Call your card issuer.
Call your credit card issuer’s customer service number and inform them of your decision. The representative will probably encourage you to keep it open. They may offer lower interest rates or enroll you in a rewards program. If you are certain you want to close the account, decline the new offers and ask them to start the process of closing your card.
5. Make a follow-up.
Take note of the date and time you called to make the request. Then, follow up in writing so you have a record of the request to close your credit card. Add your name, address, and last four digits of your credit card number. Write the details of your call and the request you made. Send the letter via certified mail and keep a copy, plus the mail receipt for your records. The issuer will close your card even if you do not follow-up. This is just to document that you made the request.
6. Check that the account is closed.
Check your credit report after a few weeks and make sure the credit card is reported as closed by you. If you did all these steps correctly, your credit score should not be hurt by closing the account. If there is any dispute, call your credit card issuer so they can close the credit card correctly.