How to Close a Credit Card Account Without Hurting Your Credit Score

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cut up credit cardMany years ago when I was establishing a credit history and not paying very close attention to my credit file, I accumulated as many as 12 credit cards. A nice chunk of them were department store and retail cards that I came by as a result of taking advantage of (or falling for) instant 10%-15% discounts on purchases while checking out at the cash register.

I’m sure most people can relate to this temptation. But if you’re not careful, it can get out of hand. In my case, I never or rarely used most of the cards again after I got them. Over the years, I closed some of the accounts and in other cases I cut up the cards but left the accounts open.

Of course, now I’m a big advocate of keeping the number of credit cards to a minimum. I think a mix of 4 or 5 bank, retail, and gas credit cards is plenty. That’s more than enough to take care of your needs and prove to creditors that you are a reliable citizen with a solid financial reputation.

But enough about me and what the ideal should be. Your question is, “What is the proper way to close a credit card account?”

Well, I’ll walk you through the steps in a moment. However, the first thing you should do is determine which credit card accounts are the best candidates for being closed. There’s a smart way to go about it and here are some guidelines that you should follow.

Best Credit Card Accounts to Close

Shutdown accounts you no longer need – This could be an account you haven’t used in a while or one where the credit card company has pissed you off. An account doesn’t have to have a zero balance before you close it. If it does have a balance, the credit card company will still keep billing you monthly until the debt has been paid off.

Close accounts that charge high interest rates and fees – This is simply a matter of dollars and cents. No need to pay more in interest charges than you have to, right? If you have multiple high interest rate credit cards, naturally you should start with the one that has the highest rate.

Cancel delinquent accounts – If you have a credit card account that has lots of late payments associated with it, then it is already at high risk of being canceled by the credit card company. So it would be better for your credit score if you closed the account rather than them.

Close accounts that you pay in full every month but they don’t have a grace period – The grace period is the number of days that you have to pay your bill without being charged interest. So if you typically pay off the credit card account balance in full when you get your monthly statement and you’re still being charged interest, what’s the point? That’s not a good deal for you.

Next, I’m going give you the steps for closing a credit card account. However, before doing that, my suggestion would be that you NOT close a bunch of accounts all at the same time. This could adversely impact your credit score. Just cut up the cards and close them gradually over time. There’s no rush.

I still have a couple of open accounts that I will probably never use again. And since my FICO credit score is over 800, I’ll just let them continue to be a part of my positive credit history. So monitor your credit score as you close accounts and be smart about this process.

How to Close a Credit Card Account In Three Steps

1. For any monthly, quarterly, or annual fees or subscriptions that are automatically charged to the credit card, contact those businesses directly and terminate those arrangements before canceling the account. Examples of recurring billings might include magazine and online content subscriptions, gym memberships, etc.

2. Send a letter to the credit card company requesting a “hard close” on your account. This will prevent any new charges from coming through. Some credit card companies may do this right away. But as a matter of policy, other companies may only do this after a certain number of days have passed. They would instead allow a “soft close”. But ask them how long it will be before a hard close will happen and follow up to make sure it gets done.

3. In the same letter mentioned above, also ask the credit card company to report the closing of your account to the major credit bureaus as “closed by customer request” and NOT “closed by creditor”. The latter wording could hurt your credit score. And just to be certain everything goes smoothly, do these two things:

– Ask the credit card company to send you a letter confirming that the account was closed at your request.

– Check your credit report 30-60 days after receiving the confirmation letter to ensure it shows that the account was closed at your request.

Now, if you’re wondering what happens if you close your credit card account, the answer is it won’t hurt your credit if you do it the right way. And again don’t close 5 or 10 accounts all at once. Do it gradually, monitor your credit reports, and consider leaving a few of them open (but unused) if they reflect a good history of paying on-time.

So there you have it. Now you know how to close a credit card account. Sounds fairly painless, right? That’s because it is. The key is to go slowly and make sure that the credit card company follows your instructions to the letter.