Canceling card doesn't wipe out charges for recurring services

Question for the expert Dear Credit Wise,
Hello Kevin, I have a little query about credit card logistics.  I got into a couple situations lately in which I used my credit card and had trouble canceling the services rendered for its use. To just make it easy (or so I think), I just canceled the credit card. Will debt continue to incur or does the wiping out of a credit card shut down all active services/debt to which it is tied? This may seem like an idiot question, sorry to waste your time if it is, but admittedly I am an idiot when it comes to this stuff :/ -- DW

Answer for the expert

Dear DW,
I don't believe there are any idiot questions, especially when it comes to credit cards. I know that it can often be very difficult to cancel some services. There are unfortunately some businesses out there that are notorious for pulling you in and never letting go. This is especially true when it comes to recurring charges. Now that the company has your business -- and, more importantly, your account information -- it doesn't want to let you go.

But your idea is not the solution to the problem. Even if you manage to stop the recurring charges to your credit card because you canceled your credit card, you do not stop the charges from accruing. This is especially true if you signed a contract for services. If you signed a contract for a certain period of time, you may not be able to cancel until the time period of the contract expires. For example, if you signed up for services for 12 months and decided to cancel after 10 months, you will likely still be responsible for the remaining months on your contract. Canceling the credit card does not cancel the debt. 

So here's what you need to do: Figure out what your obligations really are, and then deal with then.

There's some urgency to this project. If you haven't been paying your bills as agreed, there's a time clock ticking. Whoever was the service providers were, they're expecting to get paid, and they're getting impatient they haven't. If enough time passes, they'll report you to the credit bureaus as being a late payer, and that will harm your credit. 

Start by pulling your credit reports via to see if any of the charges that have accrued have gotten to the point where the vendor has reported you as late. If they haven't, breathe a sigh of relief. You still have time.

Dig up your records of any contracts you signed, and see what the rules are for your recurring charges, and then contact the service providers and explain the situation. You may have to rethink whether you really want to cancel recurring charges that you agreed to pay. Maybe that means sticking with that phone service a while longer, or that gym you're tired of. Some companies. Be prepared to negotiate: Companies may be willing to forgive late fees if they regain you as a paid-in-full, continuing customer. You'll have to balance your desire to cancel a service against the consequences of canceling.

For the future, the correct way to handle these types of situation is to understand what you sign, so you know when you can cancel services at will, when you can cancel but pay a penalty for it, and when you're obligated to pay in full. Then you can contact the vendor and let them know that you are canceling their services. While you may initiate the contact by phone, it's wiser to state your case in writing. Email may also be OK for small-dollar items. But if it's an expensive service, the gold standard for written communication is certified mail with return receipt requested. Keep copies of everything you send.

One final note: Using a credit card gives you as the consumer far more protection that using a debit card for these types of charges. Once you have contacted the company to cancel the services, you have 60 days to dispute any further charges with the credit card company. In these situations, I would suggest that if there is a disagreement over what is owed, you file your dispute with your credit card issuer as soon as you have received the return receipt, which is proof that the company received your letter. What this accomplishes is that your credit card company will actually go to bat for you to resolve the situation. You are their customer, not the vendor.

Be wise with your credit!

See related: How to dispute a credit card charge with a merchant

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Updated: 03-23-2019