It’s a good feeling to pay off a credit card balance, and you may consider canceling an account that you don’t use often so that you won’t be tempted to use it in the future. Here’s some information on how to cancel a credit card (and reasons why you shouldn’t).
Canceling a Credit Card
It makes sense to close some credit card accounts, particularly those that charge an annual fee or an interest rate that’s extremely high. Before simply closing the account, call customer service and see if they’re willing to renegotiate the terms of your account to a lower interest rate and without an annual fee. If they’re not, let them know you want the account closed.
If you have any points or cashback rewards, redeem them before closing the account. Be sure to cancel any automatic payments you’ve set up. Once you’ve taken these steps, let the company know in writing that you want to close the account, and cut up your credit card.
Reasons Not to Cancel a Credit Card Account
Closing a credit card account just because you’re not using it can actually hurt your credit score. When you no longer have that amount available to you, your overall credit utilization rate goes up. The utilization rate is the percent of the total available credit you’re using. Ideally, this number should be below 30 percent. If the card you want to close has a high available balance, removing that availability means your credit utilization rate will become noticeably larger.
The average age of your accounts is another factor that goes into determining your credit score. If the credit card account you’re thinking about closing is your oldest account, you might be better off leaving the account open, but not using it.
To Close or Not to Close
The decision to close or not to close is yours but should be made carefully after considering the impact it may have on your credit. If there’s an annual fee and the creditor won’t consider eliminating it, open another credit card account to replace it before you close it. Another option is to request a credit limit increase on one of your other cards.
If you feel you won’t be able to resist spending the available amount, leave the card at home locked in a file cabinet to only be used in a true emergency. If you still feel you won’t be able to resist overspending, having your credit score drop from a lower credit utilization rate is better than digging yourself into debt that you can’t repay.
Be Proactive About Your Credit
Having good credit can help you to get financial help when you truly need it, so it’s important to be proactive about your credit. This includes making sure the information on your credit report is accurate. A surprising number of people find errors on their credit reports, and inaccurate information can hurt your credit score.
Dovly can help you dispute inaccuracies in your credit reports. Dovly is an automated credit repair engine that can help you track, manage, and fix your credit. We are here to help you improve your credit score so you can get ahead. Try it risk free with our free membership tier. Contact Dovly today.