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.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
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.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|