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Closing a credit card account is not simply snipping a credit card. It is a more complicated process that takes more time and effort. You should understand why you are closing your credit card and how it will impact your credit score. There are many reasons you may want to close one or some of your credit cards: it is too expensive to keep, its terms became worse, it charges a high annual fee or you do not use it at all or often enough.
When you have only one credit card and you want to close it, that is much easier than when you have several credit cards and you need to choose which card to close. You may want to cancel credit card with the highest interest rates, with the highest annual fee or you may want to get rid of unused credit card.
However, you should remember that closing any credit card may hurt your credit score. Therefore, you should choose the card more carefully. Try not to close old credit cards. The age of your credit matters and when you shorten your credit history by closing the old credit card, you may see your credit score going down.
Available credit and amount of debt are other important things. The more you owe, the lower your credit score will be. It is advised to use only 30% of available credit in general and on each individual credit card you have. So, if closing a credit card will increase your debt-to-credit ratio, you may want to pay off some debt first and only then close the card.
Now, when you've chosen the credit card you want to close, you should do the following:
- Pay off the entire card balance. It will be cheaper and easier to close the card with zero balance, than the one with the debt on it.
- Redeem rewards. If your card allows you to earn rewards, you may have some points accumulated. Clear your rewards balance by redeeming points for statement credit, gift card or cash back.
- Contact customer service. You need to confirm your balance is zero and if the answer is positive you can proceed with your request to close the card. Be firm and don't let the representative to talk you out of doing it.
- Send written confirmation. You may want to write a letter to your credit card issuer to confirm the cancelation of your credit card.
- Check your credit report. When you're notified that your card is closed, get a copy of your credit reports to make sure the fact is reflected on them. It may take several weeks for changes to appear on your report. You may also want to check your credit score to see if it went down.
When the card is closed, it is confirmed, and you see it on your reports, you can take scissors and cut your closed card into pieces.
And the last, remember, close just one account at a time. Closing credit accounts in bulk may severely damage your credit. Closing accounts one by one will give the time needed to improve your credit and to consider your situation and next steps.