Knowing how to close a credit card is just one of the steps you should know if you feel no need for a particular card. It is pretty common to cancel your older credit cards if they are not in use. While keeping pace with the changing financial market, upgrading your card with time is also essential.
Considering this, you can close your older credit card if it is no longer beneficial to you. This is generally a very straightforward process, but it requires some consideration. Here is everything you should know about before closing your card.
Reasons to Cancel a Credit Card
Are you closing your credit card for the right reasons? Find out some common motivations to cancel a card.
Eliminate High Interest Rates
You may want to cancel your previous credit card if you have found better cards with lower interest rates. Many renowned credit card issuers offer competitive rates to eligible applicants. Over time, you may have increased your eligibility for such cards.
Reducing Overspending
Sometimes, it is not about switching to a new card but doing a credit card detox. For effective financial management, you may want to restrict your credit card dependence to curtail overspending.
Take Control of Your Finances
Whether due to high interest rates or correcting your spending habits, cancelling a credit card can be a boon for your finances. Moreover, deactivating cards will help you save on multiple annual fees and charges if you have many credit cards and only use one or two.
Going for a New Credit Card
You can find many credit cards with more benefits and discounts in categories you tend to spend more on. If you feel saturated with your present credit card, go for a new one if you can save more with it.
Separation or Divorce
You may not want to use the credit card shared by your spouse after your separation. This can also be the reason to deactivate your credit card.
How to Cancel Your Credit Card
Once you know the reason to cancel your credit card, follow these steps and get it done.
- Step 1: Clear your credit card account of any balance
- Step 2: Use all the reward points you have left on your credit card
- Step 3: Contact the issuer with your credit card cancellation request
- Step 4: Confirm your request in writing
- Step 5: Ask for the issuer’s confirmation in writing
- Step 6: Check your credit card statement properly
- Step 7: Dispose of your old credit card after cutting it into two halves
Cancelling your credit card via call and sending an email or a hardcopy letter is standard in most financial institutions. However, some issuers also provide online assistance to cancel a credit card. You can choose the online process if it is more convenient for you.
Things to Consider When You Destroy Your Credit Card
Before you take any steps, take a look at these checks to ensure you’re making the right decision.
Your Credit Card’s Age
Your credit history is also based on your overall experience with credit. In this case, how long back your credit history goes can be in your favour. Closing an older card can reduce the average age of your history. Think about this before you proceed.
Your Utilisation Ratio
If you cancel your credit card, you are losing out on an available credit limit. This may lead to your overall utilisation ratio increasing, which can impact your credit score negatively. If you are taking a new card or reducing your use of credit, go ahead.
Linked Payments
Before you close a credit card, check whether you have any auto payments linked to your credit card. If you do, change the payment option before you cancel your credit card. Otherwise, you may miss other payments and face penalties.
Earned Rewards
Throughout the time when you have used the credit card that you want to cancel now, you may have accumulated reward points. Redeem them to avoid losing out on their benefits. Since the redemption process varies for all issuers, learn the steps of how to redeem credit card points before cancelling.
Closing it Without Affecting your Credit Score
To maintain your score when cancelling your older credit card takes a little thought. Here are some tips to go about it.
- Tip 1: If you have multiple credit cards, try and maintain your credit score by timely repayment of other cards’ bills
- Tip 2: Check your credit score periodically to plan your improvement strategy over time
- Tip 3: Keep your utilisation ratio low before deactivating your credit card and paying off the full balance
Whatever the reason for your credit card cancellation, you should do what’s best for your pocket and financial health. For this, you can also consider a new credit card with better deals and lower interest rates. In this case, you can choose the One Credit Card and get some lucrative deals.
You can get 5x rewards for your top two spending categories and other deals and discounts on dining, travel, shopping and more. To experience seamless online onboarding and add a stylish metal credit card to your wallet, apply now!
