What Happens When You Close a Credit Card?
There are a few different reasons that you might close a credit card. There are two situations in which it is best to close your credit card. These are:
- If you are having difficulty controlling your spending, it might be a good time to close a credit card. This doesn’t mean you can’t have an occasional splurge. However, if you are having a problem, it’s best to remove the temptation and close the card.
- If the terms of your card are no longer favorable, it may be a good idea to close a credit card. This might include high annual fees or interest rates.
What happens when you close a credit card?
When you close a credit card, you are giving up a line of credit. It can take several weeks for the account to show as closed. Depending on different factors, your credit report may look different as a result of you closing a credit card. After you close a credit card, you might find that your credit age has changed, your credit utilization ratio has gone up, and that your credit score has decreased.
How does a closing a credit card affect your credit score?
A credit card isn’t the only thing that goes into your credit score. This means that closing a credit card affects some people more than it does others. Other factors that affect your credit score are payment history, amount of money owed, credit age, new credit, and the type of credit used.
Closing a card with a good payment history may lower your credit score significantly. If you are closing your only credit card, this will also hurt your credit score, as this will reduce the types of credit you have. Finally, if you close your only credit card with available credit, this will negatively impact your credit score by decreasing your available credit.
How to close a credit card
Pay off the balance in full
Before you close a card, ensure that your account balance is paid in full. Cancel any automatic payments attached to your card, including utility bills, gym memberships, or any subscriptions.
Call your credit card company
To start the process of canceling your credit card, call your credit card company. Verbally verify you no longer have a balance on your card and let the issuer know you are closing the card. Make sure you tell them that you want to permanently close your card. This is often referred to as a hard close.
Get it in writing
When you close an account, make sure to follow-up with a written letter through the post system. It’s a good idea to have physical proof to document the process, so you have proof of your cancellation if problems arise. Your letter should include a request of confirmation that the account was closed with a $0 balance as well as a request that the credit will report the account as “closed by consumer” to credit bureaus.
Check your credit
The last step to closing a credit card is to verify that the account was closed by checking your credit reports.