How Do You Close Out Credit Card Accounts?
Posted on July 29, 2010
While it is never advisable to close out all of your credit card accounts simultaneously, it can be good practice to downsize the amount of credit you have in order to repair your credit score. The key to closing accounts is to do it correctly. Otherwise, it can end up harming your credit in the long run.
Here are 7 steps to take when you want to close out your credit card accounts for good:
1. Decide Your Route
If you are interested in closing accounts because you have too many cards, you may want to consider which cards you truly no longer need. Never close the accounts you have had for the longest period of time. Doing so can decrease your credit score and make repairing your credit harder, since the length of time you have had the account is a factor in determining your credit score. Close only the accounts you do not use that have been opened recently.
2. Pay Off Balances First
Never close an account where you still retain a balance. If you do, you risk having your interest rates raised and potentially open the door for incurring fees and penalties for the remaining balance. Before closing any account, make sure it is paid in full and no balance remains on the account. You may want to consider consolidating balances on the lowest interest card and work to pay that card off in full while closing out the other accounts. Keep in mind that credit card companies do charge fees for transferring balances so check with your card company about the fees to determine the best course of action to take.
3. Document Your Progress
You’ll want to keep a list of credit card companies, account numbers, and contact information before you start making calls. Let the customer service representative know you want to close the account. Take notes during the call and include the date, time, and customer service representative’s name for later reference in the event the account is not properly closed after the call is completed.
4. Request Confirmation
Ask for a written letter of confirmation showing that your card account has been closed. Make note of the date you closed the account and if the letter has not arrived in two weeks, make a follow-up phone call to request a letter be sent out.
5. Request Credit Reporting
Confirm with the representative that the credit card company will be reporting back to the three credit bureaus to show the account has been closed per the customer’s request.
6. Beware of the Solicitation
Most customer service representatives are trained to woo you back to the company when you call to cancel your credit card account. Don’t feel obligated to stay with the company if you are firm on your decision to cancel. However, you may want to at least listen to any deal they are pitching in order to keep your business. Sometimes an unexpected offer may be more appealing than the deal you are getting with another card company. If the offer isn’t good enough, let the representative know and feel no regrets about canceling the account.
7. Learn Your Lesson
If you accumulated too many credit cards because of impulsiveness (the offer was too good, free stuff came with the deal), you need to learn your lesson now to prevent history from repeating itself. Moving forward, be selective in choosing accounts to open and stick with only one or two credit cards instead of a variety you may not be able to handle. The best way to repair your credit is to teach yourself good personal finance management.
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