Closing Credit Cards The Right Way

ROCKVILLE, MD. — When looking to simplify their financial lives or curb the temptation to spend, many people choose to close unused or old credit card accounts. But while getting rid of those cards could lighten your wallet, there are guidelines that need to be followed when closing credit accounts.

“Simply cutting up a credit card and throwing it in the trash does not close the account,” said Jen Anthony, president of OnePay, a nonprofit debt management organization. “To ensure a card is properly closed you need to send a certified letter, return receipt requested, to the customer service department of the card issuer. In the letter you should ask the issuer to close the account and report your account to the credit bureaus as ‘closed by consumer.’ In about ten days you should receive a confirmation letter stating the account has been closed. If you don’t receive a letter, make sure you follow up with a phone call.”

According to Ms Anthony, deciding what accounts to close, and when to close them, can impact an individual’s credit score significantly.

“Since the length of your credit history makes up a large portion of your credit score, you should never close the accounts you’ve had the longest,” she said. “Closing multiple accounts at once can also hurt your credit score by increasing the proportion of the balances on your cards to your total credit limit.

“Closing a credit card that still has a balance on it is never a good idea,” Ms Anthony added. “Doing so can trigger a significant increase in your interest rate which could cost you thousands of dollars and add years on to your debt repayment.”