Should You Cancel Your Credit Card? |
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by: Janna Weiss
People cancel credit cards for lots of reasons. Maybe your cards now come with an annual fee that wasn’t required before. Or maybe your credit limit has been slashed while your interest rate has increased. Whatever your reason, it’s sometimes tempting to get rid of old credit cards by closing your accounts. But is this really the best approach? Here are some factors to consider before you cancel your credit cards.
Reasons to Cancel
As mentioned above, lots of cardholders have been shocked to find that the terms of their credit cards are significantly worse now than they were just a year or two ago. That’s because of the credit crunch and the new credit card legislation. If you have cards with high interest rates and stiff annual fees, it might be a good idea to cancel them.
Some cardholders are realistic about their spending habits. Knowing that they have trouble avoiding the temptation to spend, they get rid of any unnecessary cards in their collection. If you have trouble controlling your spending, it might be a good idea to reduce the number of cards you have.
If you open a new account, you might want to cancel one of your old accounts to keep it from being targeted by identity thieves. By closing the account, you protect yourself and your credit score from crooks who want to use and abuse your good name.
Reasons to Keep the Card
There are several good reasons to keep your card accounts open, too. For one thing, the more available credit you have, the better you look to lenders. If you’re thinking of making a major purchase like a house or vehicle, you want to have as much available credit as possible. Keep your cards, but make sure the balances are low.
If you have a limited number of cards, think twice before you cancel one. Older lines of credit improve your credit rating more than newer ones. If you have an established line of credit with no negative items such as late or missed payments, you should consider keeping it open.
How to Cancel the Right Way
If you do decide to cancel a credit card, pay off the balance first. Call your credit card company and confirm that the balance has been paid in full. Then let them know you want to close the account and cancel the card. Send them a certified letter as well so that you have written proof of the cancellation. Request confirmation, and pull a copy of your credit report after a month. If the account is marked as ‘closed’, you’ve successfully canceled the credit card. If the account is still open after two months, repeat the cancellation process.
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