What Happens If I Close a Credit Card?
- The Effects of Closing a Credit Card
- How to Close a Credit Card
- What to Do With Your Credit Card After You Close It
If you’re thinking about closing a credit card, there are a few things you should know. Find out what happens to your credit score and your credit history when you close a credit card.
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The Effects of Closing a Credit Card
Closing a credit card can have both positive and negative consequences. On the positive side, it can help improve your credit score by reducing your credit utilization ratio. On the negative side, it can hurt your credit score by causing your credit history to appear shorter. In addition, it can also make it harder to get approved for new credit in the future. Let’s take a closer look at the effects of closing a credit card.
Your credit score may drop
When you close a credit card, it can hurt your credit score in the short term. That’s because your credit utilization ratio — which is the amount of debt you have divided by the amount of credit you have available — will increase. That’s because you’ll have less total credit available and the same amount of debt, making it look like you’re using a higher percentage of your available credit.
You may lose your rewards
If you’re carrying a balance on your card, you may want to keep the account open and transfer the balance to a new card with a lower interest rate. It’s also worth considering if you earned a sign-up bonus with the card that you wouldn’t be able to earn again.
Even if you pay off your balance in full every month, closing a credit card can still negatively impact your credit score in several ways. For example, your credit utilization ratio—the amount of debt you have relative to your credit limit—may increase if you close a card that has a high credit limit. This could lead to a lower credit score. Additionally, the average age of your credit accounts will decrease if you close an older account, which could also lead to a lower credit score.
You may have to pay a fee
When you close a credit card, you may have to pay a fee. The fee may be charged by the credit card company or by the company that handles the account. Check your account agreement to see if there is a fee for closing your account.
You may also have to pay a fee if you move your account to another credit card issuer. Check with the new issuer to see if there is a fee for transferring your account.
If you close your account, you may lose any rewards or points that you have earned. Be sure to use any rewards or points before you close your account.
How to Close a Credit Card
It’s important to know how to properly close a credit card. Depending on the issuer, you may be able to close your account online, by phone, or by mailing in a request. Some issuers may require you to close your account in person. You should also be aware that closing a credit card can have some consequences, such as a negative impact on your credit score.
Call your credit card issuer
The first step is contacting your credit card issuer to close the account. You can do this by calling the customer service number on the back of your card or by logging in to your account online.
When you call, customer service may try to retention you by offering benefits like a lower interest rate or annual fee. If you’re firm about closing the account, they’ll likely transfer you to the account closure department.
Have the following information ready when you call:
-The name of your credit card
-The account number
-Your name and address
-A daytime phone number where you can be reached
-A brief explanation of why you’re closing the account
Be polite but firm when talking to customer service. While it’s possible to reopen a credit card account, it’s generally not a good idea.
Cut up your credit card
Before you take this step, make sure you’ve considered the potential consequences.
Once you close a credit card, your credit score could drop. That’s because you’ll have less available credit and a shorter credit history, two factors that make up 15% of your FICO® Score☉ . Closing cards can also hurt your utilization rate — which is how much of your available credit you’re using — which can impact your score.
Additionally, closing a card means you won’t have that account to help improve your average length of credit history, another factor that makes up 15% of your FICO® Score. So if you close an older account that’s in good standing, it could cause your score to drop.
Cancel any automatic payments
Assuming you’re planning to close a credit card that you no longer use, your first step should be to contact any companies that automatically bill your credit card and cancel those payments. You can give them your new credit card number or arrange to pay another way.
Examples of automatic payments that could be set up on your credit card include:
-Monthly gym membership dues
-Recurring subscription fees (for example, to a magazine or online service)
-Home or renter’s insurance premiums
-Utility bills (if your credit card issuer offers this option)
-Minimum payments on other debts that you’re paying down with a balance transfer credit card
What to Do With Your Credit Card After You Close It
It’s not unusual to want to close a credit card. Maybe you have too many cards, you’re trying to save money on interest, or you’re trying to improve your credit score. But before you close your card, there are a few things you should do first. In this article, we’ll go over what you need to do with your credit card before, during, and after you close it.
Keep the account open for a few months
If you have a good history with the card, it may be beneficial to keep the account open for a few months after you close it. This will help to improve your credit score by maintaining a good credit-to-debt ratio and keeping the account active on your credit report. However, if you have a bad history with the card or if you’re trying to get rid of debt, it’s best to close the account and move on.
Transfer the balance to another card
If you have a balance on your credit card when you close the account, you’ll need to do something with that balance. You can’t just leave it there, because you won’t be making any more payments on that account. One option is to transfer the balance to another credit card. This can be a good idea if you have a card with a 0% intro APR on balance transfers. That intro APR will help you save money on interest while you pay off your debt. Just be sure to read the fine print before you sign up for a balance transfer, because there may be fees involved.
Use the card sparingly
If you are considering closing a credit card, there are a few things you need to do first. You should cancel any automatic payments you have set up with the card, and pay off any outstanding balances. Once you have done this, you can close the card.
However, just because you have closed the card does not mean that you should no longer use it. In fact, it is still a good idea to use the card occasionally. This will help to keep your credit score high, as well as showing lenders that you are still a responsible borrower.
So, if you have recently closed a credit card, make sure to use it sparingly and only for small purchases that you can easily pay off.