Coping with closing credit card correctly or not?

Credit cards are the easiest way to fall into a debt trap, i.e. a situation in which you borrow just to maintain your existing borrowings. There could be plenty of reasons to close your credit card: you have many cards, your card issuer increased rate of interest or maybe you don’t want to keep a credit card somehow. Any credit card cancellation must be in accordance with the banks exit policy or else it can come back to haunt the individual for pending dues. Before taking an initiative to close your credit card, find out whether closing that card affect your credit score. Undertake the following steps to close your credit card in the right way.

Pay Off the Balance

The bank will close your credit card only after it is free of any pending balance which is due to the bank. If you can, pay off the balance on the credit card before you close it. This will lessen the impact to your credit score and give you one less credit card balance to worry about. You can close a credit card even if you still have a balance, but your credit score may suffer. And, you’ll still have to make regular monthly payments (at least the minimum) until you’ve paid off the balance. Pay off your pending amount and keep a record of the payments made for future use in case of any dispute.

Communicate with the Customer Service

Once you have decided on which credit card to close first, the first step is to call the concerned customer service and intimate them about your closing card request. Call your credit card’s customer service using the phone number on the back of your credit card and follow up the request using a written communication either directly or through an email. Don’t be surprised if the representative tries to talk you into keeping your account open. For example, they may offer to lower your interest rate or enroll you in a rewards program. If you’re sure you want to close the account, don’t allow yourself to be convinced otherwise.

Check Your Credit Report

Review your credit report to make sure the credit card is reported as closed. This will allow you to keep a check on the extent of damage the credit card cancellation had on your overall credit score. Since credit utilization ratio decreases after cancellation of each credit card, it won’t necessarily hurt your credit score if it’s not reported as closed, but you want your credit report to be accurate about the status of your accounts.

Follow-up with a Letter

Once you pay off all pending dues for the concerned credit card, insist on getting a written acknowledgement to have a record of your credit card closed. After receiving a written confirmation letter only then you should destroy your card. Keep a copy of the letter for your records.
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Source: Secondary