As a consumer, you may want to close a credit card account for a number of reasons. Perhaps your issuer is raising interest rates or tacking on extra fees, or maybe you found a better deal elsewhere. Regardless of the reason, if you decide to close a credit card account, you need to do so properly to ensure that it is in fact closed.
While it may seem more convenient to simply call your credit card issuer and request that the account be closed, this may not always be effective and could backfire. There’s a certain process that you should follow to ensure that your request is honored.
Submit your request in writing
When canceling a credit card, you should submit a formal letter requesting that the account be closed. While you should feel free to contact your issuer by phone as well, a follow-up letter is necessary to prove that the cancellation was requested and received by the company in the event that they continue to charge fees. Be sure to include your name, address, and account number in the letter, and send the letter by certified mail with return receipt requested so you can prove it was received.
A case in Topeka, Kansas, highlights the importance of sending your request in writing rather than by phone. A consumer cancelled his account by phone after being notified that his credit issuer would be charging a monthly $10 fee, according to Consumer Affairs. After receiving a bill for $10 the next month, he called again and was told that company saw no record of his cancellation but would cancel the account again. After receiving yet another bill and going back and forth with the agency, he received a collection letter demanding $300 for monthly charges and non-payment fees and stating that his account was now in “delinquency status.” The amount was also reported to the credit bureaus, a move that drastically lowered his credit score.
If possible, it’s better to refrain from closing credit card accounts, since the length of your relationship with a credit issuer can benefit your credit score. But if this isn’t possible, you should make sure you take the proper steps to avoid any adverse action that could damage you financially.
Review your credit report to make sure the account is listed as closed
You should obtain a copy of your credit report following the cancellation to ensure that the account information listed on your report has been updated as well. One report shows that 80 percent of credit reports contain errors, with 25 percent of them being severe enough to result in a denial of credit.
Checking your credit report is especially important if you’re planning to make a large purchase — such as a home or car — that will require a line of credit. Examining your own credit report won’t lower your credit score, but inquiries from potential lenders can have an adverse affect. Therefore, it’s important that you review your credit report thoroughly for accuracy before putting it through a gauntlet of reviews by lenders and facing the risk of having your score drop further due to errors and repeated inquiries.
In these tough economic times, more Americans are taking steps to track their spending, develop a budget, and lower their debt. Some have even stopped using their credit cards altogether.
