How to Cancel Your Credit Card [and Should You?]

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Having too many credit cards can be detrimental to your financial health. So in some cases, cancelling a credit card is the best course of action. This guide will help you decide whether cancelling your card is the right choice, teach you how to cancel a credit card, and provide alternative solutions if you choose to cancel. 

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Should You Cancel Your Credit Card?

The number of credit cards you hold should correspond to your financial needs. Having too few or too many can have a negative impact on your credit score and history. So striking the right balance is essential. 

When to Cancel Your Credit Card

If you have too many credit cards, you can be tempted to spend more than you can afford. So cancelling one (or two) of your cards can be a good idea if you’re prone to unnecessary spending

It’s also a good idea to cancel a credit card if you have trouble keeping track of all of your payments and deadlines or if you can’t remember your PIN details. Having fewer credit cards also reduces the risk of fraud, but holding on to unused cards can increase this risk, as you don’t have enough insight into your balance

There are a few other situations when cancelling a card is a good idea:

  • If your card has been lost or stolen
  • You’ve repaid the balance
  • The interest rate is too high
  • You want to avoid paying unnecessary fees
  • You wish to simplify your finances
  • You have too many credit cards

When Not to Cancel Your Credit Card

Should I close my credit card no matter the situation? There are times when cancelling your credit card is a bad idea. For example, don’t cancel them if:

  • Your credit score is bad
  • You want to soon apply for a loan 
  • You wish to use all the reward points

If you think that card cancellation is the right choice for you, learn how to cancel your credit card by following the steps of our guide below. 

DID YOU KNOW? The first credit cards were used in the 19th-century farming communities. As the farmers’ profit was seasonal, local general stores issued cards made of cardboard to link the farmer to their account

How to Cancel a Credit Card

Once you’ve decided on cancelling your credit card, there are several steps you need to take. Make sure that you carefully follow these; otherwise, your cancellation may not be final. 

Step 1: Pay Off Your Balance

Pay off your balance. No provider will allow you to close a card with an outstanding balance. If you’re having trouble paying it off due to high-interest rates or high APR, you can consult your provider about transferring your balance to a card with 0% interest on balance transfers. (Don’t forget to cancel any recurring payments.)

Step 2: Call Your Bank

Once you’ve paid off everything, you may still be confused as to how to close a credit card. The next step includes calling your bank. Even though most banks allow you to close your cards online, it’s always a good idea to contact your representative and check if there are any fees or outstanding transactions you’re not aware of. Keep in mind that they will try to persuade you to keep the card, but stand your ground and be persistent. 

Step 3: Cancel Direct Debits

Having cards with direct debit options can be tricky. If you have direct debits paid with your credit card, you need to change the direct debit details (or cancel) since a debit payment request can reactivate your credit card, even if the card issuer has cancelled it. 

Step 4: Redeem Reward Points

When you close a credit card, don’t forget to use or transfer any reward points you have left. If you can’t use up all the points, ensure they are transferred, for example, to a Frequent Flyer programme or a similar programme approved by your credit provider. 

Step 5: Send a Written Notice

In addition to the phone call (Step 2), you also need to send a written notice to your bank via registered mail with a request to close the card. In the letter, you need to enclose the account name and number. Then, wait for the bank’s confirmation that the card has been cancelled. 

Step 6: Cut Up the Card

The question of how to close a credit card account entails one more step—permanently close your card by cutting it up. Make sure to cut through the name and number on the card so that no one can use it, even after it’s been cancelled. 

DID YOU KNOW? Credit cards don’t have expiration dates. Even though an expiration date is listed on the card, you can continue using it after it’s expired. The purposes of the expiration date are to replace the physical card and prove that you’re the cardholder when online shopping.

Additional Essentials in Cancelling a Card

Only when you’ve gone through all the necessary steps will your credit card be cancelled. Keep in mind that if you merely cut up the card, your account is still active, and you’ll need to pay the annual fee and all other charges connected to the maintenance of your account

So how do I cancel a credit card if I’m not using a particular one? In addition to the aforementioned, don’t be surprised if the issuer solves this dilemma for you. The card issuer may contact you to let you know they will lose the account unless you specify otherwise.         

Key Takeaways

Cancelling credit cards can be a good idea for many reasons.
The card cancellation process requires users to go through several steps.
The card needs to be cut up after it has been cancelled.
Closing a credit card can harm your credit score.
There are several alternatives to closing a credit card.

Does Closing a Credit Card Hurt Your Credit?

Closing a credit card can have a negative impact on your credit score because it lowers the average age of the accounts listed on your credit report—especially if you’re closing a card that you’ve had for a long time. 

The age of your account factors into the credit score, and lengthy payment history can significantly boost your credit score. But, even if your credit score takes a plunge after you close the card, it can recover quickly after a few months if you don’t take on any new debt

Should I Cancel My Credit Card if It Harms My Credit?

If you’re convinced that cancelling one of your cards is the right thing to do, you should do it. Keep in mind, however, that it’s not a good idea to cancel a card just before applying for a loan—especially substantial ones, such as mortgages or auto loans. Other unfavourable situations for card cancellation include having a recent credit history or high balances on other cards. 

When Is Card Cancellation Detrimental for Credit?

Young people have more recent credit histories, and their average net worth is lower than that of senior citizens. Financial advisors, therefore, suggest they keep at least one credit card to build their scores. 

The closing of a credit card can affect a credit score adversely if you have maxed out one or more cards, meaning that your credit utilisation rate is bad and you’ve accumulated a considerable amount of credit card debt. In such cases, keep at least one card that you don’t often use but make regular monthly payments on it. 

DID YOU KNOW? A credit-building card is a perfect choice for those with poor credit history. These cards are specifically designed to help people build their credit histories, improve credit scores, and become eligible for more loans

Alternatives to Closing a Credit Card

After understanding the advantages and disadvantages of card cancellation, you may decide that closing your card is not the right course of action for your financial situation. Fortunately, there are several alternatives you can turn to instead of cancellation that will protect your credit score and keep you from increasing your overall household debt

  • Put Your Card Away: If you don’t want to use the card but don’t wish to cancel it, store it somewhere and forget about it. 
  • Seek Out Another Type of Loan: If you’ve decided against closing a credit card to protect your credit score but have other expenses, you can apply for a different kind of loan instead of using the card.
  • Ask for Lower Fees: If the fees (or the interest rate) are too high, you can ask your provider to lower the fees. They might do so to keep you as a customer. 
  • Keep It Active: Even if you don’t use the card, put a small recurring charge on it, e.g., your Netflix account. Pay it off regularly, and don’t use it for anything else. 
  • Set a Purchase Limit: Even if you decide to use your card, e.g., for an impulse purchase, you won’t be able to spend too much at once if you have a purchase limit. 

Should You Close Credit Cards or Seek Alternatives?

The decision to close your credit cards is ultimately up to you. But remember that everyone’s financial situation is different, and there are no hard-written rules as to when you should cancel a card. If you don’t think that cancelling is right for you, you can opt for one of the alternative solutions listed above. (You can always learn how to cancel a credit card in the UK at a later date.) If you can’t decide what to do, you can always seek professional financial help

DID YOU KNOW? The American Bankers Association estimated that 10,000 credit card transactions are conducted every second globally. 

Conclusion

Cancelling a credit card is a straightforward process, but before you go through with it, you need to decide if it’s the right choice for you and your financial situation. If you choose to undergo the cancellation after the bank’s hard inquiry, you can then look into how to cancel your credit card. As we’ve seen, there are several steps to do so, leading to one less thing to worry about.

FAQ

Does voluntarily closing a credit card hurt your credit?

Closing a credit card can hurt your credit score, especially if it’s a card with a high limit that you’ve had for a long time. So it’s essential to carefully consider all the pros and cons before definitively cancelling the card.

Can you close a credit card online?

Most card issuers allow you to submit an online request to close your card. In most cases, however, a representative from the bank will call to confirm your cancellation. If you don’t receive a call, make sure you place one. 

How do I get rid of a credit card without hurting my credit?

If you wish to know how to cancel a credit card without harming your credit, make sure that you pay your outstanding balance and any fees and redeem all rewards to minimise the chances of hurting your credit.

ABOUT AUTHOR

I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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