Here's how to cancel your credit card

There are some cases when closing a credit card account makes sense, like if your card has a steep annual fee and you don’t use it, you're concerned about controlling your spending or you’re going through a separation or divorce and no longer need the joint credit card. 

Spoiler alert! Cutting up your card, letting it expire or not using it doesn’t automatically cancel your credit card account.

Before you cancel your credit card, here’s what you need to do:

• Pay off or transfer the outstanding balance. In most cases, your card will need to have a zero balance to cancel it. Some creditors will let you close an account with a balance but you still need to pay it off in full. Keep in mind that interest charges will continue to apply to any outstanding balance on your accounts even after they are closed.
• Transfer or redeem any rewards points to prevent them from being lost.
• Transfer or cancel pre-authorized payments in order to avoid penalties from your bank or creditors. If you don’t, the company will continue to bill you and the charges will build up until you pay them. 

Follow these steps to cancel your credit card the correct way:

Contact your credit card issuer

You can call your bank’s customer service or cancel your card in writing if the first option is not available. 

If you can cancel the card over the phone, make a record of the date, time and name of the representative you speak with. If you need to send a cancellation request in writing, include your credit card number and account number in the letter and state your request for the card provider to close the account.

In both cases, ask for confirmation in writing that your account has been closed.

Check your credit card statement

Following your request, log into your account to make sure that the card has been cancelled. 

Certain transactions may appear on your credit card statement even after you cancel your account, such as your annual fee. 

If you don’t receive written confirmation of the cancellation, follow up with your credit card issuer.

Check your credit report

Many are concerned that cancelling their credit card will damage their credit score. 

Truth is, there’s no simple, definitive answer to how much your score will be affected, if at all.

Credit utilization, length of credit history, use of available credit definitely contribute to how your credit score is calculated so that's something to keep in mind.

Your credit utilization ratio is how much debt you have relative to your total credit limit. Depending on whether you’re carrying debt or not, when you close your account, your credit utilization ratio may increase — it can increase quite severely if you have high balances on other cards. That will hurt your credit score. 

The credit history associated with the cancelled card will also be removed from your credit report, which can shorten your credit history.

Continue to monitor your credit report closely so that it remains error-free. Give your bank enough time — about 30 days —  to report the change to the credit bureaus. 

When you close a credit account it’s important to get something in writing to confirm the account has been closed. 

Once you receive this, destroy the credit card safely and securely and keep the confirmation for your records.