How to Cancel a Credit Card Without Hurting the Credit Score?

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Originally Posted On: https://averagecash.com/credit-card-cancellation-guide/

Whether you are trying to stop your compulsive shopping habits or can’t deal with the high annual fees, canceling your credit card could be one of the potential solutions. There are several formal procedures that you need to follow to effectively cancel a credit card.

As a matter of fact, not following the right process can get your credit score messed up, which could, in turn, outweigh any potential advantages of canceling the card. More about that later. For now, let’s look at the right steps to follow when seeking to cancel a credit card.

Clear the Existing Balance

Never try to cancel a credit card with an existing balance. Apart from the obvious impact on your credit score, you may be charged some hefty fines and be forced to repay the balance with higher interest rates. Therefore, before even making that phone call to your card company, make sure your card has been fully paid for. If you’re somehow short on cash, make an effort to transfer your debt to another card, if you have two. That way, you will maintain your credit score, avoid high charges and most importantly, get the green light to close the credit card you don’t like. Also, be sure to cash out all your rewards before proceeding with cancellation otherwise you will permanently lose them.

Contact Your Credit Card Company

The next step to canceling your credit card is to formally inform your credit card provider of the same through a phone call to their customer service department. You can get their contact information at the back of your card or on their website or social media handles. While at it, expect the customer care representative to try and sweet talk you to stay, even to an extent of giving you a nice incentive. If you want to avoid all that, you can make your application online or via email.

Have a Look at the Counter-Offer

As mentioned above, credit card companies don’t fancy losing clients, and will try everything legal to get you to stay. In most cases, when someone calls to request a cancellation, the company offers them an irresistible offer, such as lower interest rates, in a bid to convince them to stay. Of course, you may have concrete reasons behind your decision to cancel, but it does not hurt to listen and consider the offer you get. Additionally, if you’re unsure of everything, you need to first make a decision on what type of offer would make you withdraw your cancellation request.

Put it in Writing

Customer service reps are human beings, and are liable to make errors of omission or commission. To be on the safe side, follow up the phone conversation with a short letter to the credit card company outlining your decision to cancel your card. Also remember to include your personal details (name, address, contacts etc.) and your contact number and if possible, some details of your phone call to customer service. You may also want to attach a copy of the check you used to clear your outstanding balance to fasten things up. Lastly, and most importantly, dispatch the letter via certified mail and make sure to ask for a return receipt. You need that as proof that the company indeed received your letter.

Make Final Confirmation

Normally, credit card cancellation requests take about a month to complete. Count a month after you send the confirmation letter and then check your credit report to see if the cancellation was effected. Ideally, the report on that particular card’s report should read “closed. If it doesn’t, contact the company again to find out the problem.

Tips to Avoid Hurting Your Credit Score When Canceling your Credit Card

As mentioned earlier, canceling your credit card may negatively affect your credit score and hence, your ability to access credit facilities in future. Here are some tips on how to avoid that:

1. Be Strategic

Don’t just wake up one day and decide to formally get rid of your credit card. Canceling at the wrong time can reflect badly on your score. If, for instance, you are planning to take a car loan within a year from the time you intend to cancel your credit card, you better put your plans on hold until you receive the loan.

2. Choose Your Cards Carefully

If you happen to have more than one credit card and want to cancel one of them, take time to consider all the pros and cons before deciding which one to cancel. Canceling the wrong card could have an adverse effect on your credit rating. We recommend getting rid of the card that has the highest annual fees or interest rates first. Also, canceling newer cards will only have a small effect on your score as opposed to older ones.

3. Look to Mitigate the Effects of Cancellation

Canceling a credit card will always have an effect on your credit score and your responsibility is to minimize these effects as much as possible. As you close your chosen account, we recommend opening a new one to start over again. However, you don’t have to worry much if your card balances are low and your credit score is above average.

4. Check Your Credit Report

After the cancellation has gone through, be sure to take out a copy of your credit card report and go through it. First, check whether the cancellation reflects on the report, or whether there are some inaccuracies. Most importantly, make sure the report reads “closed at the customer’s request” rather than “closed by the issuer” as the later will put you in bad light and affect your chances of getting credit in future.

The Bottom Line

Whatever your reasons for wanting to cancel your credit card are, it is important that you proceed in the right manner to avoid unwanted consequences. We made sure to capture all the vital points you need to know about the process and we hope you find them useful. If you do, drop a comment and let us know!

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