Canceling a credit card is actually very easy. All it takes is a phone call to the issuer of the card. Once you have a representative on the line, you request that they cancel the card and you’re pretty much done. However, just because it is easy to cancel a credit card doesn’t mean that it is the best thing to do. There are several things to consider before canceling your credit card and the effect that it can have on your credit
It Could Negatively Impact Your Credit
When you cancel your credit card, it can potentially have a negative impact on your credit score. Canceling it will lower your available credit. That means that if you have a balance on other credit cards, it will cause your credit utilization to increase.
Also, depending on which card you close, it could affect your average age of accounts. Closing your oldest credit card will cause the length of your credit history to decrease, which will cause your credit score to decrease.
Doing Damage Control
In an effort to avoid long-term negative impacts to your credit score, there are precautions that you can. Before canceling the card, make sure that the card is paid off completely. In addition, if you have other credit cards, make sure they are paid off completely too.
If that’s not possible, at least make sure they have a very low balance. As a result, when your available credit decreases, your credit utilization won’t be too high.
Consider Just Keeping It Open
It is actually not recommended that you close credit cards that are in good standing. There are really only two reasons that you should close your credit card.
One reason is if you’re unable to resist the temptation of using the card. That means you’ve tried everything from freezing it to cutting it up to no avail. Another reason is if you’re paying an annual fee for a card that you’re not using. No need to waste money on the card if you’re not getting all of the benefits out of it.
If your reason for closing the card does not fall under those two categories, or something similar, you might want to reconsider. Try instead making a purchase very sparingly and making sure that it is paid off each month. Having that open and active card with a $0 balance will reflect positively on your credit report.