Closing a credit card account is a relatively easy thing to do, however it must be done correctly or the card may continue to exist and show up on your credit report. Even worse, closing the card may have a negative impact on your credit score if not done properly (and in fact may have an adverse affect on your credit report regardless). Simply cutting up a credit card is not closing the account. You need to contact the card issuer and notify them that you are closing the card and then follow up to make sure it was done.
Before you close a credit card, you need to make sure you are choosing the right card to close. If your credit card is the oldest credit account that you have, it makes sense to keep it open because closing that one will negatively affect your credit. If you have high balances on your credit cards, it makes sense to keep 0 balance credit cards open until you pay down the others to show that you are not using all your available credit. This proves that you can manage credit. Having a high balance to available credit ratio is seen as a poor credit risk. However once you have determined that it is indeed time to close a credit card, make sure to take the right steps.
Step 1: Clear the Balance
Prior to closing a credit card, you will need to take care of any remaining balance left on the card. This may be as simple as writing a check for the amount of your latest statement. However, if the balance is not an amount that you can easily pay off, you may need to look at alternate ways to clear it.
You may want to transfer the remaining balance on the credit card to another card. In fact, if you have another card with a very low interest rate or an interest-free introductory offer, it may be to your advantage to transfer the balance to that card. Some credit card companies will provide you with checks that you can write out to easily transfer balances. However, remember that simply transferring the balance is not equivalent to closing the card. You must take further action.
If you can not clear the balance of the card, do not attempt to close it. The company will not officially close it until the balance is paid off, but will reduce the available credit to 0. With the remaining balance, it will seem like you are using all your available credit for that card and it will reflect poorly on your credit score. Therefore, it is better in the long run for you to keep it open as you pay it off.
Step 2: Notify the Company
When you are ready to close your account, you will want to notify the credit card company both verbally and in writing of your intent to close the account. Contact the company using the phone number on the card or on your statement to inform them of your intent to close the card. It may be rather quick and easy to do so or they may transfer you to specialists who will try to convince you to keep the card. Consider ahead of time if you are open to offers that may come your way. You may be offered better terms or even rewards for keeping the card open. If you have made the decision that the card must go at all costs, do not give in to temptation.
Once you have closed the card by phone, you will also need to do so in writing. Send the letter by certified mail or return request so you have proof of doing so. This will be very beneficial if you encounter problems later.
Step 3: Check to Make Sure the Card is Closed
Once at least a month has passed, contact one of the three credit reporting bureaus, Transunion, Equifax or Experian, and make sure the credit card company has indeed closed the account. The report should tell you that it is closed and the status is “closed by customer”. If the comment is “closed by creditor”, a mistake has been made that you need to take care of immediately.
Such a comment will negatively impact your credit score, therefore it is important to get it removed and replaced with the much more positive “closed by customer” status. You will need to contact the credit card company to fix this error as the credit reporting bureau only reports the information provided to them by the credit card company and cannot fix errors. If the card does not show on your credit report as being closed, you will also need to contact the credit card company again to check on the status of your account.
Once you have cleared the balance of your credit card, closed it by phone and in writing and have seen the credit report verifying that it has indeed been done, you can rest assured that the card is indeed closed. By correctly closing credit cards, you can reduce your chances of identity theft, control excessive spending and possibly even improve your credit score. You may even want to take advantage of the numerous free credit report offers offered by credit report monitoring services to keep track of your credit score. If you want to find the best credit cards then use our free Credit Card Chaser tool!
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