Closing Credit Cards
Oftentimes, people attribute their extravagant spending habits to the easy availability of credit cards. True, most of us tend to spend because we have ready credit at hand. So, naturally when it comes to curbing our expenses, credit card is the first to go. People think that by closing credit cards, they will be able to control their spending habits. Besides, people are often advised to close their credit cards in an attempt to improve their credit scores. However, closing cards with balances is the biggest credit mistake you can commit. Let us see the various implications of canceling credit cards in this article.
Implications of Closing Credit Cards
If you have been diligent with your credit card payments, then naturally that particular credit card account will reflect a good credit score. Closing that credit card account will unnecessarily let go of your good credit history. Why would you want to do that? You will obviously want to keep as many good things as possible on your credit report. Hence, closing a credit card just because you no longer use it is not a good idea. You can use this particular credit card for making very small purchases such as dinner or socks etc. Make the full payment for this credit card debt, so that your account is always in good light. This way, your account will remain active without you having to incur huge debt amount.
Closing a credit card account which has been in use for a long time is also a bad idea. The longer your credit history, the better your credit scores. Hence, if you must close a credit card, choose a recent one rather than the one with long and good credit history. Normally, a credit account remains on the credit report for 7 years after deactivation or the last transaction. Hence, your credit card account will eventually fall off from your credit report. When you opt to close a credit card with a balance in it, after closing your balance is shown as zero. This may imply that you have maxed out your credit limit. When closing credit cards with zero balance, you don't have much to lose. Hence, if you want cleaner credit reports cut off those credit cards which have zero balance.
How to Cancel a Credit Card
Once the decision for canceling a credit card is made, it is a must to keep it to yourself. If you let the credit card company know that you are interested in closing a credit card account, they will either charge you higher interest as penalty for closing it or fix a meeting with their representative to change your mind. Hence, it is important to maintain all the secrecy measures you can! After that, inform the company regarding your decision to close the credit card account. You may call their customer service center, the number of which is printed at the back of your credit card statement. After this telephonic request, make sure you also inform them about your decision in writing. Once, your account has been canceled, it is important to have it reflected in your credit report. Check the report thoroughly for the closed credit line. Make sure it clearly mentions that the account has been closed on your request and not on the issuer's. A statement citing the closure on issuer's demand may put you in bad light.
To maintain clean finances, it is necessary to apply only for as many credit cards as you can afford. Having only those credit cards which you use on regular basis can prevent the hassles of closing credit cards. Besides, your credit score also remains unaffected.
