How To Cancel a Credit Card
If you want to cancel your credit card, you’ll have to contact the card issuer and follow up with a written letter to confirm the closure of the account. However, canceling a credit card isn’t always the best option and can negatively impact your overall credit health.
How To Cancel a Credit Card
If you decide to cancel your credit card and close the account, there are a few steps you must take to ensure your account is fully closed. Simply cutting up your card does not mean the issuer canceled the card. You’ll have to contact your credit card company and follow up with a written notice to let them know you want to close your account.
Pay Off Remaining Balance
Before you close your credit card account, pay off any remaining balance on the card. You won’t be able to close your account until you pay this balance.
If you can’t pay off the whole balance on the card but still want to cancel, you can transfer the balance from that card to a different one. Once you complete a balance transfer, it may take up to two months for your balance to clear. Once settled, you can close the account.
You should also redeem any rewards you may have earned before you close out the account. Many credit cards offer rewards programs where you can earn cash back for making purchases with your credit card. Be sure to claim as many of these rewards as you can before closing your account so that you aren’t leaving money on the table.
Cancel Recurring Payments
Many consumers set up automatic payments for their credit card bills to avoid missing payment deadlines. If you’ve set up autopay from the card you’re about to cancel, make sure you also cancel the recurring payments.
To cancel recurring payments, contact both your credit card issuer and your bank. Let both institutions know that you’re revoking authorization to make automatic withdrawals from your account. Sample letters from the Consumer Financial Protection Bureau can help you draft messages to your bank and credit card company.
Once you’ve sent in the requests to stop automatic payments, keep monitoring your bank and credit card statements to make sure the request goes through. If you notice a payment go through after you’ve revoked authorization, let your bank know right away so you can dispute the charge if necessary.
Contact Card Issuer
When you’re ready to close out your credit card account, you’ll have to make the credit card issuer aware of your request. Most credit card companies have a customer service line you can call. Confirm with the representative that the balance on your card is zero, then tell them you’d like to close your account.
There are a few more important things to say when you call to cancel your card. First, tell the representative you want the account record to show that it was closed at your request.
Always write down the date and time of the call as well as the name of the representative you spoke with. You should also ask the representative for an address you can write to for written confirmation of your account closure and make a note of that address.
After you call the credit card’s customer service line, send a written letter to the company to confirm your card cancellation. Keep a copy of this letter and send it by certified mail or return receipt requested. This way, you have proof that the company received your letter in the event that they do not complete the request.
If you’re not sure how to write a card cancellation letter, the sample letter below will help you get started.
To whom it may concern,
I am writing this letter to confirm that I am closing my credit card account with [COMPANY NAME]. My account number is [ACCOUNT NUMBER] and my balance on the account is paid in full. At [TIME] on [DATE] I contacted your customer service line and spoke to [REPRESENTATIVE NAME] who confirmed that my balance on the account was zero and that I requested to close the account.
Please report to the credit bureaus that the account was closed at my request, and please also send a confirmation in writing that the account is closed. I will keep a copy of this letter for my records.
Your name, address and phone number
Why You Might Want To Cancel a Credit Card
Most financial experts will advise against canceling a credit card simply because you don’t use it often. However, there are certain circumstances when canceling a card is a sensible decision for your personal financial situation.
- Fraud Risk
- Closing an account may be necessary if fraud has compromised your credit card. Closing the account is not the only option, but if a card you rarely use anyway is lost or stolen, you might be better off just canceling it rather than freezing the account and replacing the card.
- High Fees
- If your credit card is charging too much in annual fees, transaction fees or other charges, it’s probably worth it to close the account. You can opt to transfer any remaining balance to a card with more reasonable fees.
- Closing a Joint Account
- You may need to cancel a card to separate from a joint account, such as after a divorce.
- Spending Problems
- For some people, credit cards come with a powerful temptation to overspend. If you’re trying to curb a spending habit, canceling your credit card may be the key to keeping you from falling into debt.
Does Canceling a Credit Card Hurt Your Credit?
When possible, hold on to your oldest credit card accounts. Canceling a credit card can sometimes hurt your credit score. There are a few reasons for this: closing accounts reduces your total available credit and can also shorten your length of credit history.
Your credit score is calculated based on several factors, and one of the most important is your credit utilization ratio. The credit utilization ratio refers to how much of your total available credit you use at a time. Experts recommend keeping your credit utilization under 30% to avoid a penalty to your credit score.
The more active credit accounts you have, the higher your total available credit. So having multiple credit cards open, even if you don’t make that many purchases with them, can help keep your credit utilization ratio low. Closing these accounts lowers your available credit and brings your credit utilization ratio up, which can lead to a drop in your credit score.
The length of your credit history is another key element in determining your creditworthiness. When you cancel a credit card account that’s been active for many years, you might significantly shorten your credit history and lower your credit score. If you only have one or two active credit accounts, your score may drop even lower when one card is canceled because having too few active accounts can further negatively impact your credit.
Alternatives to Canceling a Credit Card
Because there are significant downsides to canceling a credit card, consider an alternative way of dealing with that extra card. What you should do with it depends on why you want to cancel the card in the first place.
If you simply don’t need it anymore, you could just stash the card in a drawer and not use it. Keep in mind, though, that credit card companies will flag your account as inactive if you don’t use it for a year. Because of this, swiping the old card out every once in a while to keep it active is wise.
High annual fees are another popular reason for canceling credit cards, but there may be a solution that doesn’t involve closing your account. Talk to your credit card company about downgrading your card to one with no annual fee. You may not earn as many rewards points with this type of card, but you can keep building credit while avoiding costly annual fees.
If you’re canceling the card to stop yourself from overspending, you can ask the credit card company to temporarily freeze the card. You can also ask the company not to authorize charges on the card for a few months while you work to change your spending habits or pay off debt.
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