Before you close your credit card, it is important to review your credit history and see how it will change. Simply request your credit score from any issuer and you can get it free of charge. There are also numerous websites that offer free credit scores. Although the scores are not as accurate as FICO scores they can give you a good idea about your credit standing.
Close inactive credit cards or those that are not frequently used
While credit cards can be an important financial tool, there may come a time when they are no longer used. They may have high annual fees or high interest rates. Or they might offer rewards that aren't sufficient. Whatever the reason, it's important you understand how closing these accounts will impact your credit score. Also, how to handle this change.
The FICO Score may be lower if you close a credit account. You should carefully consider whether closing an inactive credit card or one that is not used often is in your best interests. It won't help your credit score but it will reduce the temptation of making unnecessary charges.
To close down an inactive or infrequently used credit card, you should first look for a more effective way to use the account. You might open an account for online shopping with the infrequently used credit card. This way, you can make small purchases every few months and pay them off before the next billing cycle. This strategy will help keep your credit limit at a high level while demonstrating responsible credit usage.
Cancel cards with outstanding balance
To cancel credit cards with an outstanding balance, the first step is to contact the credit card issuer. Contact the customer service representative to cancel your account. But, before you close the account, confirm that your balance is at zero. If you do not, residual interest may accrue on your account. Closing an account can take considerable time and effort.
It can take several months for your credit report to reflect the cancellation. You should always get written confirmation from your issuer, regardless of how you cancelled a card. This allows you to keep track if your account has been closed. Otherwise, you could find yourself being charged for extra fees.
If you aren’t sure whether to cancel a creditcard with an outstanding balance, consult a financial professional. Sometimes, canceling a credit card with a balance can be the best way to help a creditor who isn't able to pay.
Cancel cards with a low balance before closing
Make sure you contact your credit card provider before closing your credit card account. You will need to inform your provider about your desire to cancel the account. Otherwise, residual income will accrue following the final payment. You might also be required to contact them in order to inquire about a lower rate or reward scheme.
Contact your credit card issuer for confirmation that your account balance is $0 to cancel it. After you close the account, check your credit score between 30-60 days. It should show that you've closed the account and the balance is $0, but if the balance is still listed, you'll need to open a dispute with the credit bureaus to have it removed from your credit report.
You may need to close your joint credit card if you are going through a divorce. This will prevent you from regretting later purchases. Similar to the above, if your goal is to manage debt, closing a joint card will let you focus on other debts.