At O1ne Mortgage, we prioritize your financial well-being and aim to provide you with the best advice to manage your finances effectively. If you’re considering closing a credit card account, it’s crucial to understand the process and its potential impact on your credit score. This guide will walk you through the necessary steps to close a credit card account smoothly and effectively.

Should You Close a Credit Card?

Closing a credit card can be a wise decision if you’ve had trouble with overspending or if the card’s annual fee outweighs its benefits. However, it’s important to note that closing a credit card can negatively impact your credit score, especially if it’s your oldest account. The loss of available credit can increase your credit utilization rate, and while the account history will remain on your credit reports for up to 10 years, closing it will stop positive contributions to your credit score.

Therefore, it’s essential to weigh both the benefits and drawbacks before deciding to cancel a credit card.

Steps to Close a Credit Card Account

1. Pay Off Any Balance

While you can technically close a credit card with a balance, interest and fees may still accrue until the balance is paid off. Additionally, your credit utilization rate may spike because you’ll still have the balance but not the available credit. It’s advisable to pay off your balance and check for any pending transactions before contacting your card issuer.

2. Redeem or Transfer Rewards

In most cases, canceling a credit card results in forfeiting your unredeemed rewards. Some credit card companies may offer a grace period, but it’s better to redeem all your cash back, points, or miles—or transfer them to another rewards program if possible—before closing your account. Check for any pending rewards from your most recent statement cycle.

3. Transfer Recurring Payments to a New Card

If you have recurring payments for utilities, subscriptions, insurance premiums, or other transactions on your current card, switch them to a new credit card or another payment method. Once your account is closed, new recurring payments will typically be declined, which could result in late payment fees or canceled services.

4. Contact Your Credit Card Issuer

Once your account is ready for cancellation, reach out to your credit card issuer to submit your request. Depending on the issuer, you may be able to do this over the phone, through a secure message in your online account, or via live chat. You may be asked to provide a reason for the cancellation, and the issuer may offer an incentive to keep the account open. If you want to proceed, politely decline the offer and ask for confirmation of the cancellation.

5. Destroy Your Old Card

To ensure no one gets access to your card or personal information, shred your credit card after it’s been canceled. If the card is made from metal, ask the credit card company to send an envelope for you to return the card for destruction.

6. Check Your Credit Report

Even after receiving confirmation from the credit card issuer, monitor your credit report until you see that the account is marked as closed. Ensure the account is marked as closed by the cardholder, not by the issuer. If the information is inaccurate, you have the right to file a dispute with the credit bureaus or contact the credit card company directly.

The Bottom Line

Closing a credit card account can impact your credit score negatively, but it may be the right move to improve your financial health. Take your time to consider all your options and follow these steps to ensure you don’t lose your rewards or have to continue dealing with a balance.

If you’re thinking about replacing the card with a new one, O1ne Mortgage can help you find the best options based on your credit profile. For any mortgage service needs, call us at 213-732-3074. Our team of experts is here to assist you with all your financial needs.