Closing Credit Cards: Key Steps to Take Before You Do

Think Twice Before Canceling Your Credit Card

Closing your credit card might seem like a good idea, but hold on! It could hurt your credit score and make things trickier later. Here's why:

• Credit Score Dip: Your credit score is like a report card for your borrowing habits. Closing a card, especially an old one, can shorten your credit history and lower your score.

• Credit Limit Drop: Closing a card lowers your total credit limit. This can make it seem like you're using more credit even if you're not, which can hurt your score.

• Reopening Hassle: Change your mind later? Reopening a closed card can be a pain, and you might not get the same good deal you had before.

Alternatives to Canceling:

• Talk it Out: Annoyed with fees or rates? Call your credit card company and see if they can offer you a better deal.

• Freeze the Plastic: Worried about overspending? Freeze your card in ice or set up automatic payments to pay your balance in full each month.

• Downgrade to No Fees: Consider switching your card to a simpler one with no annual fee. This way, you can keep the account open without extra costs.

Think before you cancel! Take a breath and consider these options to keep your credit score healthy and avoid future headaches.

Cash In on Rewards Before Closing Your Credit Card

Closing your credit card can feel like a fresh start, but wait! You might be leaving behind a pile of free stuff - your credit card rewards!

Here's the deal: once you close that card, any points, miles, or cash back you've earned usually disappear. Poof! Gone forever.

But wait, there's hope! Here are some ways to use your rewards before saying goodbye to your card:

Treat Yourself: Love to travel? Redeem your points for a free flight or hotel stay. Cash back rewards can be used for anything you like - a shopping spree, a fancy dinner, or even to pay down your credit card balance!

Transfer Your Rewards (Maybe): Some issuers let you transfer your points or miles to another card in the same rewards program. This is a great option if you're planning to keep another card with the same program open. Important tip: Double-check with your issuer to confirm if transfers are allowed before closing your account. Don't risk losing your rewards!

Don't let your hard-earned rewards go to waste! Use them up before you close your credit card account.

Fix Recurring Bills Before Closing Your Credit Card

Hitting the "cancel" button on your credit card might seem like a quick fix, but hold on! If you have bills set to automatically pay from that card, you could end up with a nasty surprise later.

Here's why:

Surprise Reopening: Sometimes, when a company tries to auto-bill your closed card, your credit card issuer might actually REOPEN your account just to process that payment! This can be sneaky, especially if you had a zero balance before closing. You might not even notice the new charge on your statement.

Double Whammy: The other option is even worse. Your credit card issuer might simply DECLINE the auto-payment because your account is closed. This leaves you owing the money directly to the company, and they might hit you with late fees for the missed payment. Ouch!

How to Avoid the Hassle:

• Be Prepared: Before you close your card, make a list of all the companies that bill it automatically. This could include things like your gym membership, phone bill, or streaming service.

• Change Your Payment Method: Contact each company on your list and update your payment information. Switch to another credit card, your debit card, or even set up direct bank transfers if possible.

Taking a few minutes to update your recurring bills can save you a lot of headaches (and money) down the road. So ditch the drama and make sure your bills are covered before saying goodbye to your credit card.

Closing Your Credit Card? Don't Forget About That Balance!

Thinking about canceling your credit card? Great! But before you snip the plastic, there's one crucial thing to remember: your outstanding balance.

Here's the deal:

• It Doesn't Disappear: Just because you close the card doesn't mean your debt magically vanishes. You're still on the hook to pay off that balance completely.

• Interest Keeps Ticking: Closing your card won't stop interest charges from adding up. That means your debt will keep growing if you don't make payments.

• Credit Score Shuffle: Carrying a balance can hurt your credit score. So, if you're closing a card with a high balance, it could take a bigger bite out of your score than you'd like.

What You Can Do:

• Pay it Off in Full (Ideally): The best option is to settle your balance completely before closing the account. This keeps your credit score healthy and avoids any lingering debt.

• Have a Plan: If paying it off in full isn't possible, make sure you have a solid plan to tackle the balance after closing the card. Remember, interest will still accrue, so prioritize paying it down quickly.

Closing your credit card with a balance isn't the end of the world, but it's important to be aware of the consequences. By planning ahead and taking care of that balance, you can avoid unnecessary stress and protect your credit score.

Alerting Your Authorized Users Before Closing Your Credit Card

Here's a more detailed guide on how to warn your authorized users before closing your credit card:

Before You Call:

• Gather Information: Make sure you have your authorized users' contact information readily available, including phone numbers and email addresses.

• Craft a Message: Consider what you'll say to your authorized users. You can explain why you're closing the account and apologize for any inconvenience it may cause. You can also mention the effective date of the closure (if you know it) to help them plan accordingly. Here's an example message you can adapt:

"Hi [Authorized User Name],

I'm letting you know that I'm going to be closing my credit card ending in [last four digits of card number] on [date, if known]. This means you won't be able to use the card anymore after that date. I apologize for any inconvenience this may cause.

Please update your payment information wherever you have this card on file. Let me know if you have any questions."

Reaching Out to Authorized Users:

• Phone: Call each authorized user directly. This allows you to have a conversation and answer any questions they may have.

• Email: If calling isn't feasible, send a well-drafted email using the message you prepared above.

Here are some additional tips:

• Consider the urgency: If you're closing the card due to security concerns or suspect unauthorized activity, let your authorized users know as soon as possible.

• Offer to help: If any authorized users rely on the card for recurring payments, offer to help them transition to a new payment method.

• Be clear and concise: In your message, clearly state that the card is being closed and the effective date (if known).

By following these steps, you can ensure a smooth closure for your credit card and minimize any inconvenience for your authorized users.

After you've finished notifying your authorized users, you can proceed with calling your credit card issuer to initiate the closure process.

Conclusion: Considerations and Next Steps

Closing a credit card might seem like a quick fix, but it's essential to think it over before you do it. Sometimes, you might feel upset with your credit card company or think closing it will help your credit score. But actually, it could make things worse. When you close a card, especially an old one, it can make your credit history shorter and lower your credit score. It can also make your credit utilization ratio worse. Before you close your card, try other options. If you're worried about spending too much, there are ways to manage your card better, like freezing it or setting up automatic payments to pay off your balance every month. If you do decide to close it, make sure you've done everything you need to do first. Pay off any remaining balance, update any bills that are automatically paid with that card, and let anyone who's authorized to use the card know it's closing. And when you're ready to close it, call your credit card company to start the process, then follow up with a letter to confirm it. Keep an eye on your credit report to make sure the account is listed as closed. By thinking through these steps, you can decide if closing your credit card is the right choice for you and avoid any bad effects on your finances.

If you have any questions or ideas to share, feel free to ask or leave your comments below! Your feedback is valuable to us.