Before you decide to close a credit card, you should take a look at your credit history and how it will be affected by the closure. By simply requesting your credit score, many issuers will provide it for you free. Many websites also 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
Credit cards are a valuable financial tool. However, they may be no longer needed. There may be high annual fees, high interest rate, or rewards that simply aren’t enough. It doesn't matter what the reason is, it is crucial to understand how closing them affects your credit score and how to deal with the change.
A credit card account that is closed can affect your FICO Score. It's wise to evaluate whether closing an inactive card or one you use infrequently is in your best financial interests. Although it won't increase your credit score or reduce the temptation to make excessive charges, closing an inactive account can help you lessen that temptation.
To close down an inactive or infrequently used credit card, you should first look for a more effective way to use the account. Consider opening an online shopping account using the infrequently used card. You can make small purchases over the course of a few months, and then pay them off in your 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 amount, you must first contact the creditor. Contact the customer service representative to cancel your account. Be sure to verify that your account balance is zero before closing it. You could find that residual interest is accruing to your account. It may take a lot of effort and time to close an account.
Your credit report may take up to several months before it reflects the cancellation. You should always get written confirmation from your issuer, regardless of how you cancelled a card. This way, you can keep track of when your account was closed. If you do not, you might be charged extra fees.
It is best to consult a financial advisor if you aren't sure if you should cancel a credit card with an outstanding balance. A card with a current balance is sometimes the best solution for creditors who cannot make payments.
Cancel cards with a low amount before closing
Be sure to contact your credit provider before you close your credit-card account. Tell your credit card provider that you want to cancel your account and verify that there is no balance. Otherwise, residual income will accrue following the final payment. Contact them to inquire about a higher rate or reward program.
Contact the credit card issuer to cancel your credit card account. 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.
A joint credit card may be required if you go through a divorce, separation or other significant life change. This will allow you to avoid regretful purchases. Similar to the above, if your goal is to manage debt, closing a joint card will let you focus on other debts.