Before you close your credit card, it is important to review your credit history and see how it will change. By simply requesting your credit score, many issuers will provide it for you free. There are many websites that provide free credit scores. Although they may not be as precise as FICO scores, these scores can give you an indication of where your credit is at.
Close inactive credit cards or those that are not frequently used
While credit cards can serve as a financial tool, sometimes they need to be stopped. Maybe they have high annual fees, high interest rates, or rewards that just aren't enough. Whatever the reason, it's important to understand how closing them will affect your credit score, and how to handle the change.
Closing a credit card account can lower your FICO Score. It is a smart decision to consider whether closing an account that is inactive or not used frequently is in your best interest. Although it won't increase your credit score or reduce the temptation to make excessive charges, closing an inactive account can help you lessen that temptation.
To close down an inactive or infrequently used credit card, you should first look for a more effective way to use the account. If the card is not used often, you might consider opening an online shopping bank. This way, you can make small purchases every few months and pay them off before the next billing cycle. This strategy will ensure that your credit limit is high and you are responsible with credit.
Cancel cards with an outstanding balance
To cancel credit cards with an outstanding balance, the first step is to contact the credit card issuer. You should be able call customer service to cancel your credit card. But, before you close the account, confirm that your balance is at zero. Otherwise, you may find residual interest accruing on the account. Closing an account can take considerable time and effort.
Your credit report can take many months to reflect the cancellation. You should always get written confirmation from your issuer, regardless of how you cancelled a card. You can track when your account was closed. You could be charged additional fees if you don't.
If you are unsure if you should cancel credit cards with outstanding balances, you can consult a financial adviser. Sometimes, canceling a credit card with a balance can be the best way to help a creditor who isn't able to pay.
Cancel cards that have a low balance prior to closing
Your credit card provider should be contacted before you close your account. Tell your credit card provider that you want to cancel your account and verify that there is no balance. Otherwise, residual interests will begin accruing after payment is made. You may also need to contact them to inquire about a new rate or reward program.
To cancel your credit card account, contact the credit card issuer and ask for written confirmation that the account balance is $0 before closing it. You can check your credit reports between 30 and 45 business days after cancelling the account. It should say that you have closed the account, and that there is no balance. If it still shows $0, you need to file a dispute to remove it from your credit reports.
You may need to close your joint credit card if you are going through a divorce. This will allow you to avoid regretful purchases. If you are working on debt management, closing your joint credit card will help you to concentrate on paying off other loans.