Closing a credit card isn't as simple as cutting it in half. There are some steps you need to follow to ensure your account is closed properly. After all, you don't want to be hit with any fees or miss out on leftover rewards.
Below, CNBC Select explains the six steps you should follow if you want to cancel a credit card.
- Pay off any remaining balance
- Redeem any rewards
- Call your bank
- Send a cancellation letter
- Check your credit report
- Destroy your old card
Should you cancel a credit card?
Experts generally recommend you don't cancel a credit card because it can have a negative impact on your credit score. But if you're being charged a high annual fee or interest rate, it can be beneficial to close a credit card. If you're looking to close your oldest credit card, take a minute to evaluate your decision to make sure it's a smart choice.
The Capital One CreditWise app offers a simulator so you can see how taking certain actions (closing a card or paying off a balance) might impact your credit score. This is a good place to start if you're worried that closing your card might make your score go down.
If your card has no annual fee, then there's really no harm in keeping it open. But if you're losing money on the card, you can call up the card issuer and ask if you can switch to a no annual fee credit card.
If you still want to cancel your credit card after reviewing your options, follow our step-by-step guide.
1. Pay off any remaining balance
Pay off your credit card balance in full prior to canceling your card. While you may be able to close an account with a balance — some issuers allow account closures for new charges while you pay off a balance — we recommend you pay it off in full. This ensures you don't forget about any balances or incur fees.
You can also consider completing a balance transfer before closing the card. Any lingering debt can be moved to a balance transfer credit card offering up to 21 months of no interest.
After you pay off your balance, make sure you also update any subscriptions and automatic payments to a new card. These payments won't be approved once your account is closed, and you may risk service interruption or fees from the billing company.
If you don't have a rewards card, skip to step three.
2. Redeem any rewards
If you cancel a rewards credit card, any unused cash back, points or miles may be forfeited upon account closure. It's a good idea to redeem or transfer those rewards before closing your account so you don't lose out on the rewards you earned.
Review the fine print of you card's rewards program so you know the redemption terms. For example, travel credit cards may allow you to transfer points to hotel or airline loyalty programs or to family or friends. Cash-back credit cards usually let you to deposit cash back into a linked checking account, but be aware there may be a $25 minimum redemption amount.
3. Call your bank
After you paid off your balance and redeemed any rewards, it's time to start the cancellation process. Call the number on the back of your credit card to speak to a representative.
Before you ask to close your account, double check that there is no balance. If you were carrying a balance from month to month, there may be residual interest, which accrues in the time between when your bill was sent and when your payment was made.
Once you've confirmed the balance is zero, tell the representative you'd like to permanently close your account. The representative may try to discourage you or present a retention offer, but at the end of the day it's your decision, so reconfirm that you want to cancel your account. And tell the representative you want it noted that the account is being closed at your request, which ensures it won't look like your account was closed by default.
Make sure you get key information: date and time you requested the cancellation, name of the person you're speaking to and a mailing address where you can send a written cancellation letter.
4. Send a cancellation letter
It may seem old-school to mail a cancellation letter after you just called, but it's a key step that shouldn't be overlooked. Odds are the representative you spoke to closed your account, but there's always the chance of a mistake or computer glitch.
Follow up with a brief letter to your card issuer stating your desire to close the credit card. Include that you want the account to be "closed at consumer's request" and include your name, address, phone number, account number, and the details of your call with the bank's representative.
As an added layer of protection, send the letter via certified mail so you can prove it was delivered. You can also ask for written confirmation that your account has been closed with a $0 balance.
5. Check your credit report
Remain patient as it can take a month or more for your credit report to reflect a cancelled credit card. Once you see the closed account on your credit report, verify that the reason for closure is "closed at consumer's request," or something similar. If you see a different reason, such as "closed by issuer," contact your bank to resolve the issue since it can potentially harm your credit score.
You have several ways to view your credit report for free: once a year from each of the three credit bureaus (TransUnion, Experian and Equifax) at AnnualCreditReport.com, updated every 30 days with Experian, or with CreditWise from Capital One.
6. Destroy your old card
After your account is officially closed, you can destroy your card. The simplest way to do this is to put your card in a shredder. You can also cut it into tiny pieces.
If your card is made out of metal instead of plastic, such as the American Express® Gold Card, these options won't work. Terms apply. You'll need to contact your bank and request a prepaid envelope that you can use to mail your old card back. Once received, your bank will safely dispose of it.
