Canceling your credit card seems like a simple proposition: call up the credit card company responsible for your card and tell them that you want to close your account. But there are a few twists and turns as you cancel your card, which can damage your credit if you aren’t careful. Being aware of such issues — and hopefully taking care of them — can get you through closing a credit card with no problems.
Are You Really Ready to Cancel Your Card?
No matter how careful you are, canceling a credit card will cause a drop in your credit score: the score is based, in part, on the amount of credit you have available. With your account closed, you’ll simply have less credit available. That drop can be small and temporary — as long as you’re doing everything else right when it comes to your credit score — but it will show up if any one checks your credit. You may want to delay canceling your card if you’re expecting a credit check in the near future. If you’re applying for a mortgage or a car loan, wait to cancel your credit card until your funding goes through.
Eliminate Your Balance
If you’re still carrying a balance on your credit card when you cancel it, you’ll face a penalty on your credit score. Furthermore, depending on your credit card’s terms, you may be asked to pay your balance in full immediately upon cancellation — which just makes the cancellation process more complicated.
Instead, it’s worthwhile to pay off your balance before you even start thinking about canceling a card. Ideally, you can just pay off the balance entirely but transferring it to another line of credit may also be an option.
Close Your Account Completely
Rather than relying on a phone call to make sure your credit card is closed, you’ll want a little extra confirmation — considering the long list of potential problems, like identity theft or fees on accounts you thought were closed, it’s just a practical decision. To get that confirmation, take the following steps:
- Call your credit card company and cancel the card over the phone. You may be directed to a retention specialist who will try to convince you to keep your account open.
- Write a follow-up letter, informing the credit card company in writing that you are closing your account and requesting the company report that fact to the credit bureaus. In your letter, you need to include your name, account number, address and signature. Make two copies of the letter: file one and send the other by certified mail to the credit card company. That way, you’ll be able to prove that the company received your request to close your account.
- Check your credit report. It can take about a month for an account closure to be reflected on your credit report, so wait thirty days before requesting a copy (you can get free copies of your credit report through Annual Credit Report.com). If there is a problem regarding your closed account, you’ll need to call the credit card company, as well as send another certified letter, to have them fix the mistake.
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