How to Cancel a Credit Card the Smart Way

It’s no secret that credit cards are useful tools for gaining reliable credit history. But what happens if you decide you no longer want anything to do with it? Should you opt to completely let it be? Should you talk to the bank and have them, cancel it? Whatever the reason you may have behind your credit card cancellation, there is a smart way to do so.

A credit card cancellation isn’t as easy as breaking the card or informing the bank. There is a process you might want to follow if you want to keep your credit history in a good condition. This is because a canceled credit card will be written on your credit reports. To ensure that your card is fully canceled, there are a few actions you need to take.

This article teaches you how to cancel your credit card smartly. But before that, you need to know the effects of your actions. Read on.

Effects of Credit Card Cancellation on Your Credit Score

If possible, resist the urge to cancel your credit card. This is because credit cards are one of the few things that build your credit history and backs up your financial stability. You will, later on, find its importance when you are applying for loans or mortgages.

However, if the cancellation is inevitable, ensure that you follow everything correctly as credit bureaus keep records of these factors. You must also ensure that the credit card cancellation will not hurt your credit score.

To do so, it is important to know that the credit score is given based on the following criteria.

  • Your Payment History

This key factor has a 30% value in calculating your credit score. Also, it contains the history of your on-time, complete, or debt payments. These payments help to increase your credit score. So canceling your credit card doesn’t simply mean that your payment history will vanish. 

Your on-time payments and late and missed payments will continue to exist which affects your credit score. Thus, before canceling your credit card, it is best that you repair your credit score and keep it in pristine condition.

If you do not know how to, you can hire cheap credit repair services. They will collect your reports from the credit bureaus and take out the bad info in them. As a result, your credit score will increase. So even if you cancel your card and it affects your credit score, it won’t reduce much since you already increased it earlier.

  • The Length of Your Credit History 

This factor makes up 15% of your credit score. A lengthier history of an open credit card is good for your credit score. Most banks prefer to lend money to clients with a long history of good credit management. However, when a credit card gets canceled, your credit history will be outdated. Thus, your financial stability and management can be put into question.

  • Your Credit Utilization Rate

Another key factor that makes up 30% of your credit score. This percentage shows how much credit you have open to you compared to how much you owe.

Many financial firms will consider you unsafe if your credit utilization is high. But it shows them that you’re having trouble paying your bills. If you feel canceling your credit card will reduce the amount you owe, the truth is, it won’t. Instead, it will make matters worse for you.

The reason is that any unpaid fees you incur will remain for you to pay. As such, your credit score will get affected.

Steps to Take to Cancel Credit Card in a Smart Way

1. Pay Off Your Balance

Most issuers will only sometimes permit you to cancel your credit card once you’ve been able to settle the balance you owe. This includes any transactions or subscription bills.

Even if you still go ahead to cancel the card without paying the balance, you will still be liable for the debt.

You will continue to get charged any fees you were paying up plus interest. It will continue till you get done paying it.

Also, this can be inconvenient, especially if you’re applying for a new credit card. Therefore, pay off all your credit card debts or transfer them to the new card. Also, ensure you move all subscriptions and recurring bills out of the original card. As such, more bills won’t pile up.

2. Utilize all of Your Earned Bonuses

All rewards, including cash back or airline miles you stored up while using your credit card, will get lost when you cancel it. 

Therefore, before you cancel your credit card, it’s smart to transfer them. You can also redeem them, so you can take advantage of them.

You can start by reading the rewards program details on your card to redeem the rewards. By doing so, you’ll understand the conditions for you to be able to redeem it. 

For instance, travel credit cards may let you transfer points to friends and family. In the aspect of cash-back cards, it is more simple. All you have to do is ask for redemption for a statement credit. 

However, the issuer will send you a check for the difference if you have a low balance on your card.

3. Call the Firm that Issued the Credit Card to You

The next step is to call the firm that issued your credit card. However, this is the actual first step of the cancellation process. To get the number for customer service, you can check the back of your credit card or the bank’s website.

Before you call, ensure there is no money in your account. The reason is that the funds may incur certain interest.  

After checking your balance and seeing it empty, inform the agent that you want to cancel your credit card fully.

The customer care agent will certainly make tempting deals to tempt you to keep the card open. The deals can include waiving the annual charge or cutting the APR. However, in the end, it’s your choice, so ensure you’re still sure you want to close your account. 

Finally, get critical info, such as the date and time you asked for the cancellation and a mailing address.

4. Send a Cancellation Letter as a Written Proof

The info you got from calling customer care is vital for this step. Although it may seem outdated to write and mail a letter, it’s a vital part of the cancellation process. Also, it is a terrific approach to ensure everything gets covered. 

Also, it ensures that your credit card firm gets informed of your decision. 

Ensure the letter has your name, phone number, address, card number, and info on your conversation with the customer care agent. It’s always a good idea to have written proof.

5. Review Your Credit Report

Keep calm because it may take a few weeks or more for a canceled credit card to appear on your credit report. 

When it does appear, ensure your file indicates that you requested the closure of your card. The reason is that if it shows that your bank or issuer canceled it themselves, it will affect your credit score.

On that note, always cross-check your credit report. You can get a free credit report once every year from any of the credit bureaus.

6. Destroy the Cancelled Credit Card

Destroying the card is the last step to take. At this point, you can dramatically shred your cards, like in movies. First, however, ensure the number sequence is unreadable.

As such, it can ensure that nobody tries to use the card after you cancel it.

Bottom Line

It’s not that hard to cancel a credit card. In fact, if you follow these simple steps, you can cancel your credit card the smart way and avoid any headaches or hassles. 

Just remember to keep an eye on your credit score afterward so you can make sure canceling your card doesn’t negatively impact your financial health. Good luck!

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