How to Close a Credit Card

Are you thinking about closing a credit card? Here’s what you need to know before you make a decision.

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Why You Might Want to Close a Credit Card

There are a few reasons you might want to close a credit card. Maybe you have too many cards and want to simplify your financial life, or maybe you have a card with an annual fee that doesn’t fit your budget anymore. Maybe you’re trying to improve your credit score. Whatever the reason, there are a few things you should know before you close a credit card.

You’re trying to improve your credit score

If you’re trying to improve your credit score, closing a credit card could actually backfire. That’s because one factor that goes into your credit score is your “credit utilization ratio,” which is the amount of debt you have compared to the amount of available credit you have. So, if you close a credit card with a $5,000 limit, but you still have debt on other cards totaling $5,000, your credit utilization ratio stays at 50%. But if you keep the card open and pay off the debt, your credit utilization ratio will drop to zero. That will give your score a boost.

You’re trying to save money

One way to keep your money in your pocket is to stop using a credit card-or at least reduce the number of cards you use on a regular basis. When you mindfully use credit, it can be a helpful tool. But if you find that you’re using credit to buy things you can’t afford or charging more than you can pay off each month, then it’s probably time to take a break from plastic. Reducing the number of cards in your wallet can help limit your temptation to spend.

If you carry a balance on multiple cards, consider transferring the balance of your high-interest cards to a card with a lower interest rate. This will help you save money on interest fees and potentially help you pay off your debt faster. Once you’ve paid off your debt, close the account so you’re not tempted to run up a balance again.

You no longer need the card

One of the most common reasons people choose to close a credit card is that they no longer need it. Maybe you have switched jobs and no longer have the expenses that warranted the card in the first place. In this case, it might make sense to close the account and free up some extra cash each month.

How to Close a Credit Card

It’s generally a good idea to keep old credit cards open. Closing a credit card could hurt your credit score, making it harder to get approved for new loans and lines of credit. Additionally, closing a credit card could also cause your average credit age to drop, which could also lead to a decrease in your credit score. That being said, there are some circumstances where it could make sense to close a credit card.

Call the issuer

The first step is pretty simple: call the number on the back of your credit card and tell the customer service representative that you’d like to close your account.

Be ready with an explanation of why you’re closing the account. The customer service representative may try to deter you from closing by offering benefits or perks, such as a lower interest rate or annual fee waiver. If you’re not interested in those offers, be firm and reiterate that you’d like to close the account.

If you have a balance on your credit card, you’ll need to pay it off before you close the account. The customer service representative can give you instructions on how to do that. Once your balance is paid off, ask the representative to confirm that the account has a zero balance.

If you have any outstanding disputes or charges that are being disputed, make sure those are resolved before you close your account. Once everything is settled, ask for written confirmation that your account has been closed.

Keep that documentation in a safe place. You may need it down the road to prove to future lenders that you responsibly closed an unused line of credit.

Cut up the card

Cut up the card: This seems like an obvious first step, but some people make the mistake of holding on to their old credit cards for “emergency” purposes. If you’re trying to get out of debt, getting rid of your credit cards entirely is one of the best things you can do. Cut up your card and throw it away.

Monitor your credit report

Monitor your credit report. Once you have paid off your debt and canceled your card, keep an eye on your credit report for any unauthorized activity. Without your credit card, you are not liable for any unauthorized charges, but you should still report them to the credit reporting agency so that they can investigate and remove them from your record if necessary.

What to Do With the Rewards Points

You may have decided to close a credit card because you no longer use it or you want to avoid paying an annual fee. But what do you do with the rewards points you’ve accumulated on that card? In this article, we’ll look at what you can do with your rewards points before you close your credit card.

Redeem them

The best way to redeem your rewards points is by using them to book travel through the issuers’ travel portals. When you do this, your points are generally worth 1 cent each. For example, if you have 10,000 points, you can book $100 worth of airfare.

Some issuers also let you transfer your points to airline or hotel loyalty programs. If you do this, the value of your points will vary depending on the program you transfer them to. In general, though, your points are worth more if you transfer them to an airline or hotel program than if you redeem them for travel booked through the issuer’s portal.

For example, if you have 10,000 Chase Ultimate Rewards points and you transfer them to United MileagePlus, they’re worth 1.5 cents each — so 10,000 points is worth $150 in travel booked with United.

If you have a co-branded credit card — such as the Delta SkyMiles® Platinum American Express Card — you may also be able to redeem your miles with the airline for flights on that airline or its partners.

Transfer them

If you have rewards points that you want to keep, but don’t want to keep the card, you can often transfer the points to another card. This is usually easy to do online. You’ll just need to log into your account and find the transfer options. Some programs may have restrictions, so be sure to read the fine print before you transfer.

If you have a co-branded card, such as an airline or hotel credit card, you may be able to transfer your points to their loyalty program. This can be a great way to keep your points active if you don’t use the card very often. And, if you do end up using the services of the company in the future, you’ll have a head start on accumulating rewards.

Donate them

If you have a rewards credit card, you may be wondering what to do with the points when you close the card. One option is to donate them to a charity. This can be a great way to get some use out of the points before they disappear, and it’s also a tax-deductible donation.

To donate your points, you will need to contact the customer service number for your credit card issuer and let them know that you would like to donate your points. They will usually have a list of charities that you can choose from, or you can designate a charity of your choice. Once you have made your selection, the customer service representative will process the donation and provide you with a confirmation number.

Keep in mind that there may be a minimum number of points required for a donation, and that some charities may not participate in this program. If you are not sure whether your chosen charity participates, you can check with the customer service representative when you call.