Cancel new card to minimize impact on score

Surprised by fees? Always read a credit offer's fine print before applying

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question

Dear Credit Guy
I received a credit card offer in the mail. I applied for it without reading the fine print. This card charges fees – activation and annual fees. I have not used the card yet. However, the issuer has already charged the activation fee. Is it too late for me to cancel the card? I have not even received the card in the mail yet. – Erica

Answer

Dear Erica,
I know that all too often credit card companies don’t make it easy for the consumer to wade through their applications, but yours is a prime example of how important it is to read the fine print before applying for any kind of credit. In the card issuer’s defense, the activation fee, which often is charged on cards for people with bad credit, and the annual fee were most likely listed in the offer you received in the mail. When you applied, you basically agreed you had read the offer details.

Now time is of the essence if you truly want to cancel this card. You may have received the card by now, but whether you have or not, you should immediately call the company’s 800-number to close the account.

  • When you talk with the customer service representative, be sure to tell the rep you are canceling the card because of the fees.
  • You also can ask that the activation fee be waived. Unfortunately, you may still have to pay the activation fee since you did sign up for the card, but it won’t hurt to ask. If you don’t ask, the issuer almost certainly will not refund the fee.

 

Video: How your credit mix and new credit affect your score

Impact on your credit
What will the effect of closing this account be on your credit? Closing the card will likely have very little impact, if any, on your credit score (see video). This new card may not even have made it onto your credit report.

Applying for this card might have caused a slight ding (five points or less) to your score due to the hard inquiry made by the card issuer to evaluate your application. A hard inquiry, also known as a hard pull, stays on your credit report for two years, and the overall negative effect lessens over time.

If in recent weeks yoou have changed your mind about canceling this card: 

  • Be sure to carefully weigh the costs of the fees. Will you get your money’s worth from the card? 
  • If the card offers points or other perks you can benefit from, it might be worth those costs. 

Just be sure you have a plan in place for repaying any charges you make in a timely manner to avoid interest charges, which very quickly can negate any benefit you may get from keeping the card. 

Take care of your credit!

See related: Terms to look out for in card agreements’ fine print, How to cancel a credit card... without hurting your credit score

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Updated: 11-24-2017