Before closing a credit card, take a look at how your credit history will be affected by the closure. Requesting your credit score can be done free by many issuers. Numerous websites offer credit scores for free. Although the scores are not as accurate as FICO scores they can give you a good idea about your credit standing.
Close down inactive or infrequently used credit cards
Although credit cards can be a useful financial tool, it is possible that they will eventually become ineffective. Maybe they have high annual fees, high interest rates, or rewards that just aren't enough. Whatever the reason, it's important to understand how closing them will affect your credit score, and how to handle the change.
The FICO Score may be lower if you close a credit account. You should carefully consider whether closing an inactive credit card or one that is not used often is in your best interests. The ability to close an inactive card will not improve your credit score. However, it can reduce the temptation for you to make unnecessary charges.
To close down an inactive or infrequently used credit card, you should first look for a more effective way to use the account. You might open an account for online shopping with the infrequently used credit card. This way, you can make small purchases every few months and pay them off before the next billing cycle. This will allow you to keep your credit limit high and show responsible credit usage.
Cancel cards that have an outstanding balance
First, contact the credit card company to cancel credit cards with outstanding balances. Customer service representatives should be able cancel your account. Before closing your account, make sure that you have verified that there is no balance. You could find that residual interest is accruing to your account. A closing of an account could take significant time and effort.
It can take several months for your credit report to reflect the cancellation. No matter how the card was cancelled, be sure to get a written confirmation. This allows you to keep track if your account has been closed. Otherwise, you could find yourself being charged for extra fees.
Consult a financial advisor to determine if you should cancel a credit line with an outstanding balance. A card with a current balance is sometimes the best solution for creditors who cannot make payments.
Cancel cards that have a low balance prior to closing
Before you close your credit card account, make sure to contact your credit card provider. You will need to inform your provider about your desire to cancel the account. Otherwise, residual income will accrue following the final payment. Contact them to inquire about a higher rate or reward program.
For credit card accounts to be closed, contact the issuer of your credit cards and request written confirmation that there is no balance. After you close the account, check your credit score between 30-60 days. The account should be closed and the balance $0. However, if the balance appears to still exist, you can file a dispute at the credit bureaus to have it removed.
It may be necessary to close joint credit cards if you are going though a divorce or separation. This will allow you to avoid regretful purchases. A joint credit card can be used to help you pay off other debts if you are trying to manage debt.