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Do's and don'ts when closing old credit card accounts

By Ben Woolsey

It is always important to not have more credit card accounts than you can handle. When you open a new account because of a better interest rate, a promotional offer or for whatever reason, you should always close any current credit card accounts you no longer plan on using. There are many reasons why you should do this. Closing unwanted old credit accounts: 

  • Helps you keep track of your credit cards.
  • Keeps your credit report cleaner.
  • Qualifies you for loans by lowering the amount of revolving debt.
  • Helps you avoid unnecessary fees.
  • Prevents you from being a victim of identity theft.

To help you understand what you should and should not do when closing old credit card accounts, here are a few tips to keep in mind.

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Do's when closing credit card accounts ...  

  • Close unused and idle credit card accounts.  Doing so prevents your from being a victim of identity theft and from being charged annual fees for unused cards.
  • Cancel credit card accounts with current balances that you want to pay off and no longer use. If don't want to use a credit card anymore, you can close the account and then concentrate on paying off the balance. This strategy keeps you from spending more on that account and lowers your amount of available debt when applying for a loan.
  • Ensure you still have several credit card accounts open.  Keeping several credit card accounts open will keep your credit score and debt balances healthy. Creditors view signs of activity and responsible credit use positively. However, you must use these credit card accounts responsibly or you could find yourself suffering from a poor credit rating.
  • Have one card designated for regular use and pay it off each month.  This one card can be reserved for everyday spending while your other credit cards can be used for emergency or specific purposes, such as vacations, business trips, etc. By paying off this one card each month, you won't need to worry about carrying a balance when using the other cards for higher-priced items.
  • Check your credit report. After closing an account, check your credit report to ensure that the accounts have been marked as closed and to determine whether there are any errors. Look for late payments, high balances and signs of identity theft.
  • Destroy canceled credit cards.  It is important to cut up closed credit card accounts by cutting through the account number. This prevents someone else from stealing your credit card and reopening the account.

Don'ts when closing credit card accounts ...  

  • Don't close your oldest credit card account.  This could cause your credit history to appear shorter and could harm your credit score. Better to keep the account open and not use it or just use it infrequently. If you want to close it because of a higher interest rate, contact the credit card company to see about lowering the APR.
  • Don't expect credit card accounts to close automatically. The only way an account is closed is if you contact the credit card company and ask, preferably in writing, to close the account. Contact their customer service department if you need its mailing address. Typically, the card issuer will confirm that the account is closed within 10 to15 days.
  • Don't be pressured into canceling several accounts at once. It is better to gradually pay down and then close the accounts if you are unsure about the impact doing so will have on your credit score or you are uncertain as to the amount of debt you need to carry. You may need those credit cards again in the future.
  • Avoid over-consolidating balances onto one card.  If your credit balances rise to above 50 percent of your available limits, you may see a drop in your credit score.

Having a credit card is a privilege and a benefit that many people enjoy. Be smart when closing old accounts to ensure you get the best possible APRs and benefits from your credit cards.

See related: How to cancel a credit card, The ABCs of residual interest

Published: February 18, 2006


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