So you’re thinking of canceling a credit card or two? Before you do anything, make sure you’re doing it for the right reasons. For instance, many people incorrectly think that canceling a credit card will help their credit score. But because canceling a credit card may reduce your credit allotment – and thereby your debt-to-credit ratio – canceling a card could actually hurt your overall score.
Bottom line – before you go about canceling credit cards, make sure it’s for the right reasons and won’t cause you to enact any credit repair tactics to build your score back up. Canceling a card, particularly an older one, may also hurt your credit history, another factor that goes into your FICO score. Good reasons for canceling a credit card, for example, are because of poor customer service, annual fees or if you just plain don’t use a particular card anymore.
Closing Your Card: Contacting the Company
After you’ve made the decision to cancel your card, your next step should be to contact the credit card company and inform them of your choice. From here, the initial representative that you make contact with will likely transfer you to their retention department, where a specialist is tasked with keeping you as a customer of that particular credit card.
If you’re not interested in speaking with a specialist, whose goal is to keep you a customer, see if you’re able to close your account online to avoid the hassle. Often times, retention representatives will offer additional award points, waive annual fees or offer some sort of other incentive to keep you as a customer. If you’re dead set on canceling, you’ll just have to keep declining their offers.
Tie Up Loose Ends
Regardless of the reason behind why you’re canceling your credit card, there are various loose ends you’ll have to tie up. For instance, if there’s a remaining balance left on your account, you’ll need to settle that before you can officially close it. Secondly, you’ll want to be sure that you’ve cashed in or transferred any reward points that you hold with your credit cards – that is, if you don’t forfeit any earned points by closing the card out.
Finally, after you’ve paid off any balance and redeemed any reward points, don’t forget to destroy the card. Even though your account is closed and the card is inactive, it can’t hurt to discard of anything that a potential hacker could track back to you.
As you can see, closing out a credit card isn’t a complicated affair – you just need to make sure that you do your due diligence and that you’re canceling for the right reasons. Canceling for the wrong reasons may actually hurt you more than it could potentially help you.