Before you close your credit card, it is important to review your credit history and see how it will change. Requesting your credit score can be done free by many issuers. There are also numerous websites that offer free credit scores. While the free scores may not be as accurate as the FICO scores, they can provide you with a good idea of where you stand with your credit.
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. Perhaps they have high annual costs, high interest rates, and rewards that aren’t enough. Whatever the reason, it's important to understand how closing them will affect your credit score, and how to handle the change.
Closing a credit card account can lower your FICO Score. It's wise to evaluate whether closing an inactive card or one you use infrequently is in your best financial interests. Closing an inactive account doesn't improve your credit score, but it can reduce the temptation to make unnecessary charges.
An inactive or infrequently used credit account should be closed. Open an online shopping account with the card that is infrequently used. This allows you to make small purchases every few month and pay them off before your next billing cycle. This strategy will keep your credit limit high, while also showing responsible credit use.
Cancel cards with an outstanding balance
First, contact the credit card company to cancel credit cards with outstanding balances. The customer service representatives should be able to cancel your account. Before closing your account however, ensure that the balance in your account is not more than zero. If you do not, residual interest may accrue on your account. Also, closing an account may require a significant amount of time and effort.
It can take several weeks for your credit report and bank statements to reflect the cancellation. Regardless of how you cancel a card, make sure you get a written confirmation from the issuer. This allows you to keep track if your account has been closed. You might end up paying additional fees.
Consult a financial advisor to determine if you should cancel a credit line with an outstanding balance. In some cases, canceling a card with a balance is the best solution for a creditor who can't make payments.
Cancel cards with a low balance before closing
Contact your credit card provider before you close your credit cards account. You'll need to tell them you'd like to cancel the account and confirm that the balance is zero. If you don't, residual interest will begin accruing after your final bill. You may also need to contact them to inquire about a new rate or reward program.
To cancel your creditcard account, contact the creditor and request written confirmation from them that the account balance has been $0 before closing it. After you close the account, check your credit score between 30-60 days. The account should be closed and the balance $0. However, if the balance appears to still exist, you can file a dispute at the credit bureaus to have it removed.
If you're going through a divorce or separation, you may need to close joint credit cards. This will ensure that you don't make regrettable purchases. Similar to the above, if your goal is to manage debt, closing a joint card will let you focus on other debts.