How to cancel a credit card? Tips, Step-by-step guide & more

While movies might show a card being cut in half, and then thrown away, there’s certainly more to it when it comes to cancelling a credit card. If you’re not sure about what you should do, there’s no need to worry. We have compiled a detailed guide to help you learn everything that you need to know.

So, if you want to learn how to cancel a credit card while also simultaneously avoiding any potential drawbacks, then read on to find out.

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Here are the basic steps you need to take in order to cancel your credit card:

1. Get in touch with your credit card issuer
2. Clear your credit card account to make sure you’re not carrying a balance
3. Use all of your remaining rewards
4. Confirm cancellation with the credit card company by phone
5. Make sure you also get confirmation in writing
6. Check your credit report
7. Cut up, and dispose of your old credit card

Is it bad to cancel a credit card?

Before cancelling a card, it's important to make sure you are doing the correct thing as cancelling a credit card could impact your credit utilization rate – which is something credit reporting agencies use to calculate your credit score.

But first, what's a credit utilization rate?

If you have two credit cards that each has a credit limit of $4,000, then your total amount of credit would be $8,000. If the balance on the two cards comes to $2,000, then your total credit utilization rate would be 25%.

Say you cancel one of the cards, but still retain the same balance. In this case, your credit utilization rate would jump to 50%.

When is it a good idea to cancel a credit card?

Still, there are a couple of cases when it’s best to cancel a credit card. Here are a couple of instances when it makes total sense to do so:

• If the card’s annual fees are high, you should consider cancelling it. However, always contact your provider first to figure out if it’s possible to waive these fees.

• If you’re struggling with spending. Some people find it hard to resist spending on a credit card, and this can lead to financial issues. In this case, it's always a good idea to remove the temptation, and cancel the card.

• If you have split up from a partner, and you have a joint card. Instead of keeping the account open, it’s best to cancel the account as you’ll still be held responsible for any occurring charges in the future.

How do you cancel a credit card?

If you want to close your credit card account, then there are a few steps that you will need to carry out:

1. Find out who do you need to contact

Discover who at the credit card company you need to get in touch with, in order to cancel the card. You can find this information in the terms and conditions or in the advertiser disclosure.

2. Pay off any remaining balance

Make sure you pay off your balance when closing a credit card. If you don’t do this, then there's a chance that it could affect your credit. It can also lead to additional fees on top of what you already owe, if you try to cancel the card with a balance already on it.

3. Redeem any rewards

Many credit cards have bonuses in place that ensures customers will be further enticed to use the card. If one of the terms is “the customer receives compensation” or something similar, then you may have collected some bonuses. Before you cancel your card, make sure you can get access to these rewards, otherwise you will lose them once the card is cancelled. It's important to check that they have been approved or endorsed.

4. Call your credit card issuer

Once you have cleared the balance, it’s important to call up, and ensure the balance is definitely down to $0. As soon as this has been completed, you will then be able to confirm that you want to cancel the card.

5. Send a cancellation letter

Although you may have spoken to someone on the phone, this is not the same as putting your cancellation in writing. You will have to send a letter. Make sure that any written correspondence is properly recorded, so that you know it has been received by the credit card company. Once your letter has been received, then the cancellation of your card will be official.

6. Check your credit report

This is the vital step. Just because you have cleared your balance and sent off your cancellation in writing, the credit card company might not have informed your credit report. Do a thorough check to make sure that your report is up-to-date once your card is cancelled.

7. Destroy your old card

This is the final step you should take. It’s simple enough to carry out. Just destroy the card. Cutting it up is the easiest way to do it, and dispose of it. It’s also best to try to split up the different parts of the card, so that none of your personal details can be found by anyone going through the trash.

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Cancelling a card - Bottom line

When it comes to cancelling a credit card, there is a lot to check before making the decision. That’s why we have put together this guide to make it simple for you. Of course, in the modern world many people are moving away from credit cards and like to use other payment methods, such as Wise. This is one of the many reasons that cancelling credit cards is becoming more common.

If you decide to cancel your card, then it is vital to make sure you follow every step that we have laid out. If you don’t, then there is a chance that your credit report could suffer. An important thing you need to look at before cancelling a card is your credit utilization rate. If this is too high, then your credit score could plummet.

It’s also important to make sure that your balance is at zero before cancelling. If you still have a credit card balance, then there could be some problems in the long run if you try to cancel the card. Another crucial aspect, is to make sure you confirm your cancellation in writing. Most credit card issuers won’t accept verbal confirmation alone, so make sure that the written cancellation will follow soon after.

On the whole, there are a lot of reasons why you may or may not want to cancel your credit card. Whatever you decide to do, it’s important to weigh up all the information and from there, make the right choice for you.