Taking the scissors to your credit card can be a satisfying feeling, especially if you’ve just finished paying it off. But knowing how to cancel a credit card the right way can ensure your credit score won’t take a hit as a result.
As a credit card churner, I’ve canceled many cards over the last few years. The following steps have helped me every time I’ve canceled credit card accounts.
1. Get your credit card balance to zero
You might think the first step in learning how to cancel a credit card is to contact the credit card issuer. However, there’s a lot to do before you get to that point.
Your first item of business is to pay off your credit card balance if you haven’t already. You can close a card with a balance, but it’s easier to pay it off beforehand.
Your balance includes pending charges and authorizations. In some cases, merchants don’t process transactions immediately. So, you might want to wait a few days after using your card for the last time to make sure no lingering charges pop up.
If your balance is too high to pay off now but you still want to cancel the card, consider transferring your balance to another credit card.
2. Update recurring payments
If you’ve used the credit card for recurring payments, update your payment information with those merchants. That way, they won’t try to charge a canceled credit card.
Many merchants charge a fee for failed payments, so take the time to update all of them. And don’t forget recurring charges that don’t happen monthly, such as car insurance or annual memberships.
3. Pay down your other credit card balances
If you have other credit cards with balances, closing one credit card can hurt your credit score. Here’s how.
One of the biggest factors in your credit score is how much you owe; it makes up 30 percent of your FICO credit score. And one part of that factor is your credit utilization ratio. This ratio is calculated when you divide your credit card balance by your available credit across all your cards.
For example, say you have $1,000 on a card with a $5,000 credit limit and $2,000 on a card with a $4,000 credit limit. In this scenario, you have three separate credit utilization ratios:
- $1,000 / $5,000 = 20 percent
- $2,000 / $4,000 = 50 percent
- $3,000 / $9,000 = 33 percent
If you cancel a credit card, your overall available credit goes down by the amount of available credit you had on that card. As a result, your credit utilization ratio can increase.
In general, it’s best to keep your ratio below 30 percent. So, do the math to make sure closing your card won’t put you above that threshold.
4. Use up your credit card rewards
If you’ve earned credit card rewards, you could lose them when the account is no longer active.
If your credit card earns airline miles or hotel points, your rewards generally are safe. That’s because the credit card issuer already has transferred them to the airline or hotel partner.
However, if you have a credit card with the issuer’s proprietary rewards program, you could lose everything you’ve earned as soon as you cancel the card.
Before you reach out to the issuer, go into your online account and redeem your remaining rewards. Just keep in mind that some credit cards have minimum redemption requirements. If you don’t have enough rewards to meet the minimum, you’ll lose them.
5. Contact the credit card issuer
To deliver the news that you’re canceling your credit card, you’ll need to call or put your request in writing.
The fastest approach is to call the number on the back of your credit card. When you reach a customer service representative, they’ll let you know if you owe any accrued interest.
They’ll also ask you the reason for closing the account and might send you to a “retention team” to see if someone can offer you an incentive to keep the card. Stay firm and restate your desire to cancel the card.
Once they’ve processed the cancellation, they’ll give you a confirmation. In many cases, you’ll be able to see in your online account that the card has been closed.
Another way to cancel is to send the credit card issuer a letter or secure message through your online account. This process can take longer, but you should receive a confirmation in writing that your request has been processed.
6. Watch your credit report
After the credit card issuer confirms that it has canceled your account, it needs to let the credit bureaus know. This process can take up to a few months, so keep an eye on your credit report through a credit monitoring service like Credit Karma.
If the account hasn’t been marked closed after a few months, reach out to the credit card issuer again and request that it reports the account accurately.
7. Watch your online account
On a few occasions, a merchant has refunded a charge I made on a credit card before canceling it. Despite the card’s closed status, however, the refund was processed, giving me a credit balance.
Whether or not you know a refund is coming, check your online account periodically to see if one comes through. In some cases, the credit card issuer doesn’t remove the closed card from your online account, so you just have to log in to see the balance.
In other cases, you might need to call the credit card issuer to get a credit balance refunded to you by check.
Know how to cancel a credit card to preserve your credit
If you cancel credit card accounts without following the right steps, you could risk damaging your credit.
But doing it right from the start will help prevent a ding to your credit, which is especially helpful if you plan to apply for credit again in the near future. As long as you continue to use credit responsibly, you’ll be able to maintain or build a solid credit history.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
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Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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