Unfortunately, many people do not realize that cancelling a credit card account can actually hurt their financial standing and their credit scores. It is not as simple as merely cutting the card in two and throwing it in the garbage. The reality is cancelling a card requires planning and understanding on how it can impact someone financially. Using some simple tips and some basic knowledge, consumers will learn how and when to close their credit card accounts the proper way.
The Process of Closing Credit Card Accounts
Consumers should follow specific guidelines step-by-step in order to save time and money. Here is a simple guide, consumers can follow for closing credit card accounts.
Who to Contact-
Consumers should find out who to contact through the financial institution’s customer service number. The financial institution’s website often provides vital contact information for closing accounts.
Paying the Balance Due-
Consumers cannot close credit card accounts unless the balances are paid in full. If consumers cannot immediately pay the balance in full, they can find new financial institutions offering lower interest rates on balance transfers until they can pay the balance in full.
Confirm the Remaining Balance-
Many consumers fail to confirm their remaining balances once they officially close their accounts. Consumers should never assume their balances are zero after paying the balance in full. Some financial institutions continue to charge annual fees or they may continue to charge interest rates from the time they sent the bill and the time of the final payment.Many people close revolving lines of credit to avoid excessive spending and high interest rates and fees. As the interest rates banks charge rises, so too does interest rates on cards. This scenario often causes consumers to impulsively close their accounts. Consumers must realize that closing an account does not immediately remove payment information from their credit reports. Positive payment information, such as timely payments, can remain on credit reports for 10 years while negative information, such as high balances or missed payments, remain on credit reports for seven years.Card Balances also affect how lenders decide to extend loans or lines of credit. Just because a person closes one credit card account does not determine whether or not a lender loans that person money. If the person still has multiple trade lines with high balances, lenders take that into consideration far more than they do closed accounts.