How to cancel a credit card
How to cancel a credit card
Check out the pros and cons of cancelling your credit card, and how to go about it.
Why cancel a credit card?
You might have credit cards you haven’t used for a long time and aren’t likely to use in the future. Perhaps you’ve taken out a balance transfer card that you’ve now paid off, or have a card where you’re no longer getting the introductory offers you signed up for. You may have had poor service from the credit card provider and no longer want to use their card.
Or you may feel you simply have too many credit cards and might be tempted to spend more than you can afford to pay back.
On the face of it, it might make sense to cancel these types of cards. But it’s not as straightforward as that, because doing so can have an impact on your credit score – the record that helps lenders decide whether to give you credit.
The alternative to cancelling – just holding on to credit cards but not using them – also has its pros and cons. Let’s take a look.
What are the benefits of cancelling a card?
Firstly, you should be less vulnerable to fraud. Having a credit card you’ve half-forgotten about, with a PIN and password you can’t remember and a balance you don’t check, isn’t great for security. In the case of a long-unused card, your lender might eventually get in touch with you saying they’ll close the card but, in the meantime, you’re vulnerable.
So cancelling a card can be safer. Plus, if you’ve been a good customer, telling a card provider you intend to cancel might result in them offering you enticing deals to stay. These could include bonus rewards and competitive interest rates.
Plus, you might actually improve your credit score by cancelling an unused card. Your credit score is determined by your ability to use credit responsibly, so if you have credit available to you that you don’t appear to be using, lenders may not see you as a good candidate to lend to – and that can negatively impact your credit score. Lenders might also worry that you’ll suddenly use all the credit available to you and not be able to pay it back.
What are the disadvantages of cancelling a credit card?
Cancelling a credit card if you have high outstanding balances on other cards and loans can negatively impact your credit score.
This is because of something called the credit utilisation ratio – the portion of credit you’re using out of what’s available to you. The aim is to only use under 30%, or preferably under 20%. Cancelling unused cards increases your credit utilisation ratio and may make lenders less keen on giving you credit.
Make sure you’re not cancelling a card that has a lower rate of interest, is costing you less in fees or would give you better perks than any cards you’re keeping.
From the Money team
‘If you have a few cards you want to cancel, hang on to the oldest one. Having stable, long-term financial relationships looks good in the eyes of lenders.’
Cancelling your credit card
Once you’ve weighed up the pros and cons, you may decide to cancel your credit card. Here’s how to do it:
- Clear any outstanding balance: if you want to, you can apply for a balance transfer card and move the balance to a new card.
- Cancel your card with the provider: you can do this online or by calling the provider directly – the number is usually on the back of your credit card.
- Destroy your credit card: once you’re sure that your credit card has been cancelled, destroy your card by cutting through your name and the number. This will prevent anyone from using your details to reactivate the card and potentially commit credit card fraud.
Remember that cutting up a card doesn’t mean it’s cancelled. You have to go through the steps above. And once you’re done, check your final statement and your credit report to make certain your account has been closed.
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