How to Properly Close Your Credit Card Account
Closing your credit account sounds like a fairly simple matter, but if not done the right way, it can lead to more than just a few complications. Here is how to properly let go of your credit card account.
- Settle all unpaid balances. It is important that you pay back all unpaid balances before closing your credit card account. If doing so isn’t an option, think about transferring the balance to another card in order to avoid unnecessary interests and fees.
- Make sure that your account has zero balance. Just because you’ve fully repaid all outstanding balances doesn’t automatically mean you have zero balance in the account. There are times when residual interests are placed in between the time the bill was sent and when you paid off all of the balances. Make sure that you inform the credit company that you intend to close the account after settling any unpaid dues to make sure that you actually have zero balance.
- Sending them a letter helps. Sometimes, verbally stating your intention to close your credit card account isn’t enough. It is best to write the credit card company a letter telling them that you want to close the account, and that you are asking for confirmation of the account’s closure. Also, make sure that closure of the account upon your request is indicated in your credit report in order to avoid any complications that may arise from such discrepancies.
- Keep a record of your transactions. As you go about the process of closing out your credit card account, take note of all the people you’ve talked to and what you’ve discussed. That way, you will have something to look back to in case anything goes wrong. It also doesn’t hurt to ask for a copy of your credit report a month after closing your account to make sure that everything is in order.
Below is a list of credit card accounts that you might want to keep active.
- Any credit cards with outstanding balance. You might not realize it, but whenever you cancel a credit card that has unpaid balances on it, your total available credit as well as your credit limit will be reported as zero, making it appear as though you’ve maxed out your account. Closing a credit card account with unsettled balance has a detrimental effect on your credit utilization, which is the ratio of your balance against your credit limit. This, in turn, negatively affects on your credit score.
- The only credit card you have. Maintaining a good credit score sometimes requires a healthy mix of loans and credit. As long as you pay your credit card bills on time and you never max out your account, you can set up a revolving credit that helps raise your credit score. A credit card account that is in good standing makes it easier for you to apply for loans and additional credit cards, and closing it only limits your borrowing options.
- The oldest credit card you have. Your credit history has a lot to do with your chances of getting approved or declined for a loan. The longer you’ve maintained good credit, the better your chances of getting the lender’s approval. Closing an old credit card account, especially one that is still in good standing, negatively affects your credit history, which in turn brings down your credit score.
- Your credit card that has the best terms. If you have more than one credit card, you might want to reconsider closing the one that has the best terms. This way, you get to enjoy the best interest rates, better perks, and maybe even zero annual fees.