How does closing a credit card account

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List of Partners vendors. Is it bad to cancel a credit card? However, there are a few valid reasons for deciding to close an account. Read on to learn what they are—and to get details on how to cancel a card the right way. This potential score drop often occurs because closing a credit card can impact your credit utilization ratio. The ratio measures how much of your total available credit is being used, according to your credit reports.

The more available credit you use per your reports , the worse the impact will be on your score. You should aim to pay your credit card balances in full every month. Doing so not only protects your credit scores, it can also save you a lot of money in interest. Paying your balance in full is especially important before closing a credit card account.

The higher the utilization ratio, the more it can negatively impact your score. 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 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.

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.

Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards. Edited By Grace Pilling.

Edited by. Grace Pilling. Reviewed By Courtney Mihocik. Reviewed by. Courtney Mihocik. Previously, she led insurance content at …. Share this page.

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Here are the two big ways in which closing a credit card affects your credit:. Read more From Holly. About our review board. You may also like How to cancel a credit card without hurting your credit score. Everything you need to know about credit utilization ratio. How to close a Capital One account. But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you.

That's why we provide features like your Approval Odds and savings estimates. Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can. In fact, the consequences of closing a credit card could stick to your credit scores and reports for a long time. Canceling a credit card might seem like a simple way to move on to a new, better option — or maybe you want to end a relationship with a card that you now realize was too costly and partly to blame for your debt problems.

But a closed credit card can stick out like a sore thumb on your credit reports and affect your scores considerably. If you currently rely on your credit card for common expenses, canceling a card could prompt you to change many of your habits.

If the card you used previously at those locations earned rewards, you might also be losing out on similar benefits moving forward. On the other hand, you might have already decided you prefer to pay with a debit card, check or cash. But each of those options comes with its own specific uses and potential issues, too, so consider what that future might look like before acting. There are five major factors that influence your credit scores : payment history, amounts owed, length of credit history, new credit and credit mix.