If you have a problem with high balances on your credit cards or have many cards, you may consider canceling some of these cards. But is it bad for your score? Hanfincal will show you how to cancel a credit card in a smart and safe way.
1. 5 reasons to cancel a credit card
Although closing your credit card is usually a bad idea, here are 5 reasons that a card cancellation may be in your best interests.
1.1. You face high annual fees
The credit card has high annual fees and you have to pay them even if you are no longer using this card. We believe that no one will like it. You can call your issuer and ask if they can waive this fee for the unused cards, this way works more often than you think. In case it doesn’t and you want to close your card account, make sure that you will not need the highest credit score possible in the following 6-12 months.
1.2. You are separating or divorce
During a separation or divorce, it is preferable to cancel joint credit card accounts. As a joint cardholder, you will be accountable for any charges made on the account in the past or in the future. Your divorce decision may state that your former spouse is accountable for the debt, but this does not relieve you of your responsibilities in the eyes of your lender.
1.3. You have too many cards
With new promotional offers appearing on a regular basis, you might open a new credit card very often. At the same time, you don’t want to close with a million different cards, not to mention the mail and fraud issues that may arise as a result of them. The easiest approach to keep your credit card collection under control is to close the newest cards you no longer use.
1.4. Your credit card gets lost or stolen
There is a technical distinction between canceling a credit card and completely closing one. Generally, you may cancel a card without entirely closing your account.
In case you lose your card or someone has access to your account information and begins charging you. Your credit card provider may simply close this card and issue a new one with a different number, expiration date, and CVV code. This has no effect on how the account appears on your credit reports, so you will not lose any credit history as a consequence.
1.5. Too much temptation
Some people have problems with overspending and feel difficult to resist the desire to use credit cards. Although this is a reasonable cause for some to close a card, there are alternative methods to attempt to cut back on spending without jeopardizing your credit score.
You can remove your card from your wallet. You may find it simpler to resist the temptation if you do not have your cards readily available. In case you can not do it, closing your account is a good idea.
2. How to cancel a credit card Hanfincal
Hanfincal will show you 7 steps to cancel a credit card without hurting your credit.
Step 1: Redeem rewards
Transferring your rewards point to cash back reward programs or another card is the first thing you should do. This is because any reward points you have might vanish when you close your credit card. Remember to redeem them before canceling.
Step 2: Pay off the balance
You can ask to cancel your card, however, your card is not entire close until all balance is paid. If your card is not paid in full, keep it open until you can. In case you have multiple cards to pay every month, you can try the snowball method to pay off your balance easier.
Step 3: Change automatic payments
If the card that you want to cancel is linked with any other account for payment such as Hulu, Netflix, and so on, remember to update the new payment methods for your account. If not, you will face the risk of payments not being received on time, resulting in late fees or service delays.
Step 4: Contact your card company
To cancel your credit card officially, call your card issuer or bank and ask to close it. Don’t be convinced by the customer service representative if they ask you to continue using your card. Remember the reason you for canceling your account.
Step 5: Send a letter of cancellation
The letter of cancellation maybe not be required. It is just for extra protection. Ask the customer service representative about the address to that you can send your certified letter. In this letter, you should require your card company to confirm your account is paid in full.
Step 6: Check your credit report
After 30 to 45 days after cancellation, check your credit report again and make sure that your balance is $0 and the account is close by the cardholder. In case you find any mistake in your account history including payments that were incorrectly recorded as late or missing, or your card is active even after you close it, you can make a dispute. You can receive a response from the credit bureau within 30 days.
Step 7: Destroy your credit card safely
You can destroy your card after officially closing it. The simplest and safest way to destroy is to put your card in a shredder and cut it into tiny pieces. If your card is made from metal, you need to contact your bank to request them to dispose of it safely.
3. May Closing A Credit Card Account Affect Credit Score?
Canceling a credit card account may hurt your score, especially these two big parts of your credit score:
- Increase your overall credit utilization: Credit utilization accounts for 30% of your credit score. Once you close an unused credit card with a high spending limit, it may increase your overall utilization ratio. Generally, creditors want utilization rates of less than 30%. So, if canceling your card pushes you way above that number, it’s advisable not to.
- Shorter your credit history: The length of credit history makes up for 15% of your overall rating. This includes the ages of your oldest and most recent open accounts, and also the average age of such accounts. You should consider if you want to close your oldest card since it reduces your average account age.
It is important to know how much your score will fall if you cancel your credit card account. If canceling an account is not very necessary, you better should not do it.
Don’t close a credit card account unless you have a valid cause. If you use your credit cards carefully, having a number of them won’t affect your credit score too much. However, if you must cancel a card, try to follow our guidelines about how to cancel a credit card safely so that any credit score impact is minimized or avoided entirely. Follow Hanfincal for valuable information about financial health.
==> Read More:
- Should You Cancel Unused Credit Cards?
- What Is Closing Date On Credit Card?
- How To Check My Credit Score Without Hurting It?
- What Happens If You Don’t Activate A Credit Card?
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