Tips for Closing a Credit Card Account


Tips for closing a credit card account

If  you are thinking about closing a credit card, the first thing you should consider is your personal financial situation. As we talked about in previous blogs, closing a credit card account will most likely have an impact on your credit score.

If you already have a stellar score and you close one account, you’ll likely still have a high enough score to qualify for good rates, even if it does take a temporary dip. The same is true if you have very poor scores—if you close one account, your score will still simply be considered “poor,” but you’ll have one less credit card to rack up debt.

Make sure you also consider how much you use the account, how much you need it, whether you are able to repay the debt and what the account is offering you before you decide to close it – make a call to the creditor to see if they’ll offer you better terms to keep it open.

And remember, you don’t need to make all credit decisions with only your score in mind; instead, consider your situation and whether keeping the account open will ultimately hurt or help your finances. If you’re not planning on applying for any debt in the near future, it’s a moot point.

There are some ways to minimize the effect on your credit score when closing an account. Consider the following:

  • Switch all recurring bills to another card beforehand to avoid late payments.
  • Pay down your debt on other cards as much as possible before closing—this can help keep your credit utilization ratio as low as possible.
  • Lenders typically like to see a credit utilization rate below 30-35 percent, so you should keep this in mind before you close an account that will put you over this threshold.
  • Monitor your credit report after you cancel—in 30 to 60 days, the account should show as “closed.”
  • Your lender/creditor will usually send a letter confirming the account closure—make sure you receive this letter and keep a copy for your records.

Check out more credit tips and tricks from our Credit Sense blog.




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