Should You Cancel a Credit Card?
If you’re on a mission to pay off debt, you may be thinking of canceling one or more of your credit cards. Getting rid of a credit card can certainly take away the temptation to run up more debt. But it’s not always a cut-and-dry answer: here are some things to consider when thinking about canceling credit cards.
Control Your Credit Card Spending
The main reason many people close accounts is to cut down or totally eliminate their credit card use. Dormant credit card accounts that haven’t been used in a long time may also attract identity theft. So getting rid of credit cards you don’t need can cut down on the likelihood of your identity being compromised.
What Happens to Your Credit Report?
Closing credit card accounts could have an impact on your credit report. Even after a credit card has a zero balance and has been closed, it can remain on your credit report for up to 10 years if there is nothing negative associated with the account. Closed credit cards that had negative information such as late payment histories generally stay on a credit report for about seven years and can depress your credit score.
Credit scores are based in part on how long you’ve had credit cards and other lines of credit open. The longer you’ve held a credit card with a positive history, the better it is for your credit score. However, if you already have excellent credit, closing a card has less impact than if you had a low score.
How to Close a Credit Card Account
If you haven’t already, pay off your credit card in full or use a balance transfer credit card to move the balance to a different account. You can close a card that has an outstanding balance, but you run the risk of having the interest increased on it. To close the account, contact the credit card issuer using the 800 number on your statement. The customer service representative may try to talk you out of closing the account or even offer you some kind of deal, but stick to your guns if your true goal is to close the account. You should also follow up with a written letter stating your intent to close the account.
Keep careful records of any phone calls or mailings involving the account. Once the credit card is canceled, you should receive a letter from your credit card company stating that the account has been closed a your request.
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