What You Need To Do When Canceling A Credit Card
After paying down credit card debt that has been a nuisance for quite some time, it may be tempting to cancel the card, so you don’t find yourself in trouble again. However, completing this process the wrong way can lead to your credit score falling, so be sure you know what you are doing.
Only cancel one card at a time
Every time you eliminate a card, you are reducing your available credit, which, in turn, increases your credit utilization ratio. As a result, you may see your score fall, so you should be careful about closing more than one in a short period of time. The best plan of attack is to get rid of the card that is costing your the most money. For example, if you have one that charges a $99 annual fee, and comes with no rewards, it may be best to rid yourself of this card.
Pay down the balance in full
Before you even think about closing a card, it is important to make sure it has a zero balance. Closing an account while there is still debt on it can lead to your credit provider charging high fees and interest on that amount. If you are unable to eliminate the balance, then you shouldn’t complete this process yet.
Cancel your card online
Banks and credit card providers that offer online banking generally allow you to cancel your account online, and if this option is available, take advantage of it. If you end up having to call them directly, you may be on the phone with a customer service representative for a whole as they attempt to keep you with the company. They may even offer certain perks and promotions, so if you don’t want to be tempted, it is best to stick to your provider’s online banking portal when canceling.
Keep a close eye on your credit report
After canceling a card, you will want to monitor your report to be sure that information is being reported accurately. For instance, you won’t want the balance you paid down on the card to still be on there a few months after closing your account, as this can hold down your score. Every consumer is entitled to a free copy of this document from all three major bureaus.
April Lewis-Parks has more than 15 years of experience in the financial sector, she is a certified financial counselor, and a consumer affairs advocate. As the director of education and public relations for Consolidated Credit she is dedicated to generating awareness about personal finance issues and acts as their consumer affairs advocate. As host the of MissMoneyBee.com, she promotes financial education and offers timely and informative personal finance articles to educate the public. April’s promotional efforts can be seen in past issues of the New York Times, Washington Post, Newsday, Consumer Reports, the Business Journals, Money Magazine, Glamour, Cosmopolitan, Family Circle, among others. Connect with April on Google+.