By closing a credit card you can be free of a high-interest rate agreement, as well as get your credit scores up by freeing the available credit. There are a few simple steps that one has to bear in mind while closing a credit card to ensure that you don’t get any nasty surprises later.
- The first step is to clear the existing balances. If there is a balance on the card then you must first clear the balance before closing the card. There are two ways to go about it – you can either pay off the balances the old-fashioned way, or you can do a balance transfer onto another card with a low interest rate.
One must however, be aware that balance transfers will involve a fee that is normally 1% to 5% on the total amount that is transferred.
- Check the cardholder agreement and follow the procedures for closing a card and see the penalties that could be levied, before you decide to close the card. There might be a charge for early closure if the card had been opened recently.
- Technically the awards and rewards will belong to you even if you have closed the card. But it is better to collect them before closure of the card. However, if you have not yet reached that amount where you could redeem your rewards then see if it is worth sticking to the card until you reach that level where you can redeem your reward points. If the reward is an insignificant amount and if you will end up paying more than the value of that reward then it is better to close the card and cut the losses.
- Cancel all the automatic payments as well as transfers that you have towards the credit card. If this is not done, payments will go through $0 balance and this might cost you extra fees and involve time-consuming paper work.
- Before canceling the card look at the last statement. If there are any recurring bills or charges on this card, and ensure that there are no last minute charges that appear just when you thought that the balances were cleared.
- Normally credit cards will have a separate number for card closure. You should be able to find it on your card statement or use the customer service number.
- Always insist on the confirmation of the card closure in writing with the date of closure. Never take their word for granted.