How to cancel a credit card: Cancelling a credit card can reveal more than one person. There are many mysteries surrounding the cancellation of a credit card : How do I do it? How does the balance get handled? Can I get my credit history damaged by cancelling a card? We answer these questions and more below.
Cancellation of a credit card
Although you chose a credit card which was not the best option, it was approved; however, the annual percentage rate (APR) , annual fee, and the way you qualify for certain benefits have left you disappointed. You know how to cancel a credit card safely before “passing the scissors”.
At least some guidance on how to cancel a credit card without damaging your credit score is needed. In this article, we cover everything you need to know about cancelling a credit card successfully.
Please read this before cancelling your credit card
It is normal to feel disappointed or frustrated when you receive something that was not what you expected, and this is particularly true for a credit card. Be aware, however, that you need to do more than simply cut up your credit card to pay it off.
In order to close the credit card account permanently, you must follow certain specific steps with the least impact on your credit score.
The following information will help you to successfully cancel a credit card.
Keep Reading: How to transfer money from a credit card to a debit card
Should I cancel my credit card?
No, probably not!
Ask yourself this question before cancelling a credit card: Do you really need to cancel it? What about paying the full balance, putting it away, and not using it?
Nonetheless, there are two compelling reasons for closing a credit card account:
- Expenses are out of your control, and you need to stop giving in to temptation.
- When you pay an exorbitant annual fee for a credit card you don’t use.
If you find yourself in this situation, cancelling your credit cards makes sense since they are costing you money and unnecessarily disrupting your finances.
My credit history will be affected if I cancel a credit card?
You should consider the impact closing a credit card account may have on your credit score before closing it.
When you cancel your credit card, your credit report will not be immediately cleared of your payment information, whether it is favourable or not.
The favourable credit information from the account may remain on your credit report indefinitely if you decide to keep it open.
There is a shortened due date for the majority of bad items on your credit report.
A credit report is required to remove negative information such as missed payments and foreclosures after seven years under the federal Fair Credit Reporting Act.
On the official USA.gov site, we can access powerful credit reports and scores.
Keep Reading: What happens if I don’t pay my credit card on time?
Rates of credit utilization and cancellations of accounts
Moreover, lenders consider the amount of credit you still have after a card has been cancelled, as well as the credit limit associated with it.
Roger Griffin, director of public education at the renowned credit bureau Experian, explains:
“Credit utilization ratios are more significant today than credit availability.”.
According to Griffin, “low balance-to-limit proportionality is a good indicator of credit risk for lenders.”.
If a card is cancelled, what happens to the usage fee?
To compensate for the cancellation of a credit card, the expert recommends that you request an increase in your credit limit on another card and maintain the relationship. This will help you maintain a healthy credit score.
Closed credit card accounts with high credit limits could harm your credit rating, depending on how much available credit you have. This is especially true if you have high balances on other credit cards or personal loans.
You should pay off all balances on all your other cards as soon as possible if you do not get a limit increase. Therefore, when you cancel a credit card, your score will not be affected.
By cancelling a credit card, you will not affect your credit utilization rate if you have no balance.
Christina Goethe, a former spokeswoman for FICO, the most widely used credit score provider. She says closing a card will have only a temporary impact on someone with established positive credit.
Old credit is the most reliable credit
Another significant factor is the age of the credit card account. Rod Griffin states that the length of time an account has been open affects credit scores.
As a result, you should appeal for the most recently issued credit card to minimize the impact of canceling it. Griffin maintains: “The longer the positive history, the higher the credit scores.”
How negative? Griffin says there is no generic answer. Compared to others, credit scores play a major role in determining a person’s credit history. Due to the very unique nature of one’s overall credit history, closing a previous account might pose a significantly higher risk to one person than to another.
Closing a card account does not erase that history from your report. However, if you open a credit card with better terms to replace the old one you’re cancelling, your credit score won’t be affected.
Keep Reading: What does a credit card closing date mean?
How do I cancel a credit card? Here are 7 steps
It takes time, patience, and organization to pay off a credit card properly.
Keep track of who you talked to, what they said, and when you spoke with them as you pay off your credit card. So you will have all the facts if something goes wrong.
For a hassle-free cancellation of your credit card, follow these steps.
1. Get in touch with the customer service department
Write down the customer service number(s) and mailing address you will need to begin the card cancellation process.
The issuer’s website and website address contain customer service numbers; you will also be able to find the mailing address on the website and on your monthly statement.
2. Redeem any rewards that remain
It is common for cards with loyalty plans to lose some rewards and accumulated miles when they are closed, which is unfortunate and cannot be avoided. Although this loss of benefits can be minimized with a little planning, it is still likely to occur.
On the issuer’s website, you can view the balance of miles and rewards as well as redemption procedures.
You can earn points as a statement credit if you can’t redeem them for travel or merchandise.
Generally, cashback cards and cash back credit cards have the simplest redemption features.
There are, however, thresholds or minimum consumption amounts required for these types of accounts. The accumulated rebates may only be distributed once a year under some rebate programs. It is important to understand the redemption rules before you cancel your credit card so that you can plan how to collect your accumulated rewards.
3. Make the remaining payment
The issuer can freeze the card until the balance and account are paid off if you do not want more charges to accrue until the balance is cleared.
Pay the entire balance of the account statement for at least two consecutive months if you are not used to making full payments. This will help you maintain debt from month to month. This will avoid accruing more interest charges.
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4. Contact your bank
While the issuer sent the bill and the payment was made, interest and other charges may have accrued. The residual interest is usually that amount.
You should inform them that you are cancelling the card after you are sure that the balance is zero. You may be able to cancel your credit card without even speaking with a representative at some companies, but other companies may be more difficult to deal with.
It may be difficult for the customer service representative to convince you to cancel the card, but if you are firm in your decision, stick to it. If you are no longer interested in or budget for a product, you have a right to cancel.
Write down the name and address of the person you talked to, along with the date, time, and identification details of the representative you spoke with, so you will be able to write your cancellation notice to them.
5. Make sure you send a letter to close the card account
In the event that the customer service representative is unable to help, send a brief cancellation letter to the card issuer as an additional safeguard.
As well as the details of your previous phone call, the letter should include your name, address, phone number, and account number of the card you want to cancel.
You should also indicate that you want your credit report to reflect that the account has been closed at the consumer’s request.
Include some proof of the last payment, such as a copy of the check or the electronic transfer as evidence of the total payment.
Make a copy of the letter for your records. Make sure you send the letter certified mail or return receipt requested so that you can prove the letter was received.
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6. Verify your credit report to confirm the cancellation
When you check your report, if you realize that the account appears open, repeat the process.
Report the error to customer service, follow up with a certified letter with a copy of your original letter as an acknowledgment, and check your credit report again. You may have to pay for the credit inquiry this time.
In the event that it does not work, you can file a dispute with one of the three credit bureaus and notify the others as well. In case that doesn’t work, you can file a complaint with the Consumer Financial Protection Bureau.
7. After confirming your cancellation, dispose of your card correctly
You can finally dismiss your credit card after documenting the cancellation process and ensuring your credit report reflects the “closed account.”.
Use scissors if you must, but make sure to remove all of the card’s information, including the CVV number, expiration date, and signature. You don’t want to be a victim of fraud.
If you’re in the market for a new loan or mortgage, you might consider delaying paying off a credit card a bit.
Any consumer with good credit should not be concerned by the cancellation of a credit card, since any impact on their credit score should be minimal and temporary.
Keep Reading: What is the grace period for credit cards in the USA?
What are the obstacles to cancel the credit card?
Financial entities cannot force you to maintain a business relationship that you no longer want, neither through commercial promises nor through exit barriers (adding requirements other than those specified). In the event such obstacles arise without any reason for the client’s decision, the user can file a complaint against the same entity or with the competent bodies, including Indecopi and the user service platform of the Superintendence of Banking, Insurance and AFP (SBS).
Here are some tips on how to use your credit card
Below are a few recommendations to consider:
As long as your financial health allows you to pay at the end of the month, use a credit card as a means of payment.
If you cannot finance a purchase, do not use your credit card.
Use it only if you are in urgent need of financing due to the high interest rate.
You can take advantage of the promotional offers for several months without interest.
You benefit from promotions that give you points for travel and other benefits.
Does cancelling a credit card affect my credit history?
Your credit history will reflect the timely payments you made with your credit card. As a result, if you cancel after a long period of continuous credit relationship and full and timely payment behaviour, this information will remain in your credit history. In this case, you should not be concerned, as you will still be able to receive credit from other financial institutions.
On the other hand, if you cancel the credit card after a long period of debt negotiation or write-off, this will be marked on your record as relatively negative behaviour. If you can meet your financial obligations, even if it is late, it is better than not doing so at all.
As a rule of thumb, it is advisable to notify the Credit Bureau after cancelling a credit card, so that it can be established that the account was closed, without debt, and a credit report can be obtained.
Is it possible to cancel the credit card with debt?
We discussed before that a card cannot be cancelled until it has been zeroed out. However, you are not required to settle the debt with the bank that issued the card. There is the possibility of transferring debt from one credit card to another from a different financial institution.
This is possible when interest rates and annuity payment conditions are lower at another bank. By cancelling the card, you will leave its balance at zero, but you will have to settle the debt with your new creditor.
Have you figured out how to cancel the credit card ? By following the above steps it’s simple right? Feel free to comment if you have any doubts!