Before you close a credit card, read this.
Credit cards are convenient tools for making payments and creating a solid credit history, but sometimes they outgrow their usefulness and we need to cancel them.
No matter what your reason for closing a credit account, follow these six easy steps to ensure you close the account and avoid any unforeseen complications.
1. Pay off the outstanding balance
Though often easier said than done, paying off the outstanding balance is the first step. You can do this the old-fashioned way by paying off the balance over time, or if you’re looking to switch, you can transfer the amount to a new low rate credit card. Many new cards come with an interest free period, which will allow you to get a head start on paying down the outstanding balance. Use the period wisely.
2. Check the fine print
Do you know what the account closing procedure is for your credit card? Before being too hasty, make sure you check the fine print to see what your rights and responsibilities are when closing the account. If you opened the account fairly recently, there may be a fee for early closure. It’s better to find this out early.
You can’t take your credit card rewards points with you. Rather than just let them go to waste, take the time to cash them in. Depending on how many points you have, a gift voucher or magazine subscription might be all you’ll be able to get, but it’s better to have something tangible to show for your years of credit loyalty.
3. Cash in your rewards points
4. Update any automatic payments
If you have automatic deductions set up for payments such as your home and contents insurance or a website subscription, make sure you update the payment details before closing your account. You don’t want to find that your car insurance has been cancelled due to lack of payment when the time comes that you need it. If you can’t remember what payments are coming out, check your last statements.
5. Call the credit company to close the account
Over the phone is usually the easiest way to close an account. Be mindful: financial institutions don’t give up your patronage without a fight. While the customer service operator may enquire about your reasons for closing the account and try to change your mind, stand firm with your decision. Closing the account won’t take effect immediately, so make sure that you’ve changed any direct debits payments.
6. Seek confirmation in writing
Once you cancel your card, request that the company sends you confirmation in writing. This will give you proof that the cancellation has been received and give you the date the closure will come into effect. Keep this letter for your records. If the card comes up in future credit checks, you have proof the account was closed.