Credit card debt is an increasingly severe problem in the U.S. As Americans become more dependent on their small plastic cards, the amount of debt seems to just get bigger. And bigger.
According to Experian , the average American has a credit card balance is almost $6,200. Along with individual and household debt, the total amount of credit card debt in the U.S. has reached its highest level ever.
Whether debt has got you down, or you’re wanting to consolidate your existing credit cards and opt for ones that have the best perks and benefits for your circumstances, the question of canceling a credit card can be an extremely sticky one.
Many of us find ourselves wondering the best course of action to reduce credit card debt without affecting credit score, and the concern is valid.
While closing an account may play a role in getting a better handle on any existing debt, it’s important to understand ways to cancel a credit card in a way that doesn’t end up setting you back even more.
Ahead are some common steps that are typically needed to be taken in order to fully cancel a card, including sending a written confirmation and keeping a watchful eye on your credit report after you’ve put through a cancelation request.
Do You Really Need to Cancel?
It can be tempting to cancel cards or close accounts when things get overwhelming. But sometimes this may not be the best option.
In many cases, canceling a credit card can actually damage one’s credit score. In fact, canceled accounts may remain on a credit history for several years after the date they are closed. (With a card in negative standing, it will remain on your credit history for up to seven years, and a cancelled card in positive standing typically remains for 10 years.)
It’s important to take the time and analyze your motivations behind canceling an account before you actually do. After all, it may be smarter to simply cut up or hide a credit card rather than officially canceling.
As always, the decision is up to you, but it’s helpful to take these considerations into account before finalizing a decision that may have a long-lasting impact on your credit health and your long-term financial future.
Closing One Account at a Time
If you’ve decided that canceling your card is the best way to go for you, there are some things you may want to keep in mind before getting started.
First of all, when it comes to canceling credit cards, it’s important to remember that not all of them are created equal.
Depending on the exact reasons that led you to wanting or needing to cancel a card, you may want to consider a few things before pulling the trigger.
For example, if you’re thinking of canceling a card, you may want to consider canceling new ones instead of old ones to avoid impacting your credit score.
In the world of credit, older, more established credit in good standing is looked upon more favorably than new, and so you may want to keep this in mind when choosing which card you would like to cut.
On top of this, some credit cards may offer more appealing rewards programs for your lifestyle than others, so you may want to take stock of the perks that come with each card before deciding which one you want to stop using.
Paying Off or Transferring Your Balance
Depending on the total amount of credit you have available, closing a card account with a high credit limit could run the risk of damaging one’s credit score.
If you are carrying high balances on other cards or have active loans, this damage could be especially noticeable, since your debt-to-credit ratio (also called your credit utilization ratio) may affect your credit score. (Typically, you’d want to stay at 30% or below.)
If you’re planning on canceling a credit card, you will likely want to ensure that you’ve paid off any remaining balances on that account. If you fail to do so, you may end up having to pay interest charges on any remaining balance.
If you normally carry a balance from one month to another, you may need to take extra care to pay the full statement balance before canceling a card in order to make sure there is no money left in your balance and avoid future interest charges.
You may also want to take some time to brush up on your knowledge of credit card utilization, as it can be important to understand when it comes to canceling your credit cards smartly.
In order to lessen the negative impact of closing one of your credit card accounts, you may want to pay off all of the balances you carry on all of your cards first.
If you cancel a card while carrying zero balances on all your cards, your credit utilization rate should stay at zero, so even if you cancel a card and remove its balance, your rate shouldn’t be impacted.
Need help paying off your credit card debt?
Look into a SoFi personal loan.
Contacting a Credit Card Company
Once you’ve paid off your credit card balance, you will want to contact your credit card company to put through your request to close your account.
Sometimes, you will be able to cancel a credit card without making a phone call. It may be helpful to look up how to cancel a particular credit card online to see if your credit card company offers this option.
In most cases, you will want to contact your credit card company by phone. Usually, your customer service number will be printed on your credit card.
From there, you’d inform your credit card company that you are canceling your card. Keep in mind that some companies require you to speak to a customer service representative in order to complete this process, while others are more flexible.
It’s helpful to know that credit card representatives may be trained to try to convince you to keep your account open. Remember that you have the right to close your account at any time.
Before you hang up the phone, you may want to ask your representative for their name so that you can include it along with your written notice of cancelation.
Sending Written Confirmation
Once you’ve called and canceled your card, you may choose to mail a written confirmation letter to your credit card company. This can be a good option in order to protect yourself generally, but also in the event that the customer service representative made a mistake while putting through your card cancelation request.
In the letter, you would write things like your name, phone number, address, and account number as well as the details from the call you had with your credit card representative. If you got their name, you may want to also include it here.
You might choose to also state that you’d like your credit report to show that the account was closed at your request.
If you choose to mail a letter, consider sending it via certified mail so that you can ensure the company receives it, and make sure to keep a copy for your records.
Keeping an Eye on Your Credit Score
When canceling credit cards, patience is key. From the moment you begin the process to the moment your credit card is officially canceled, it may take one month or even longer, depending on the company.
After your account has officially been canceled, you may wish to keep tabs on your credit report to ensure that your credit card has in fact been listed as closed.
If, for some reason, the card is still marked as open, you may need to get back in touch with your credit card representatives and, possibly, repeat some or all steps in this process.
Know that it can sometimes take several weeks for changes to show up on your credit card report. For this reason, it’s good practice to get into the habit of checking your credit score regularly, whether or not you’ve recently closed a card.
Of course, if you did just cancel a card, you may want to wait a month or so to see whether or not closing your account impacted your credit score.
Keep in mind that, every twelve months, you can get one free copy of your credit report online through AnnualCreditReport.com . Some credit card companies may also offer apps that allow you to check your score for free.
Destroying Your Card
Once you’ve confirmed that your card is canceled, then you’re almost done with the process.
If you’ve ensured that the account is in fact closed, then you can officially destroy your card in the manner of your choosing.
Though cutting up a credit card may provide a feeling of freedom and catharsis, it’s important to be careful to choose a method that makes sure the information on your card is not recoverable.
If you have access to a shredder, shredding your card may be the most efficient and secure way of destroying it.
If you’re using scissors, make sure that you properly cut up all the identifying pieces of information on the card, including your signature, the expiration date, CVV number, and the credit card number itself.
From there, ensure you properly dispose of the shards. For an added layer of security, consider throwing them away in more than one garbage can.
Maintaining a Healthy Relationship with Credit
Despite the array of credit card-related woes many Americans experience, it is possible to leverage credit cards in a healthy and productive way.
Depending on your needs and financial circumstances, finding ways to use credit to your advantage is a great way to ensure that you don’t wind up with more debt than you can handle.
A credit card cancelation can often offer an opportunity to take stock of the way you’re using credit, and establish better practices moving forward.
Once you’ve familiarized yourself with your credit utilization, and taken a look at the rewards you are currently signed up for, you may choose to go about things differently in the future.
One of the best ways to help you keep tabs on your credit is to build a practice of checking your balance and your credit score regularly.
This may look like downloading an app that lets you see all of your savings, checking, and credit card accounts in one place, or just getting into the practice of logging into all of your account on a regular basis.
Whichever way you choose to go about it, there are several strategies you can try out that may help you to keep your credit in check.
From leveraging balance transfers to using the snowball method to help pay off any debt balances you currently have, there are ways to help you get your credit card debt and finances under control—regardless of whether or not you decide to get rid of some of that seemingly precious plastic.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.