How to Cancel a Credit Card Without Hurting Your Score

credit cards. When each card offers unique travel and cash back rewards designed to motivate you to spend, the situation can quickly get out of control. The average American cardholder has 3.7 credit cards, so if you find you have too much plastic in your pocket, you may be wondering how to cancel a credit card to get control of your finances.

First, it is essential to consider if canceling your credit card if the right choice for you. Canceling your credit card is a simple solution to a complex problem, and there may be repercussions that affect your credit score or ability to qualify for loans. In addition, if you’re like most Americans with an average of $6,375 of credit card debt, you likely have unhealthy spending habits that may cause you to further into debt even if you do cancel a card. Before making a decision, you’ll want to weigh the pros and cons of canceling your credit card and make sure you’re not deactivating your credit card for the wrong reasons.

If you feel confident about your decision to cancel your credit card and you have talked to a financial advisor, keep reading below to learn how to cancel a credit it card:

1. Consider the Timing and Impact on Your Credit

When you close a credit card, your credit score may be affected. It’s helpful to understand that a part of how your credit score is calculated is the length of your accounts and your credit utilization. Your score goes up the more unused credit you have available compared to the debt you have used. When you cancel a card, your available credit goes down, worsening your credit utilization ratio. While this may help you avoid the temptation to overspend or help simplify your bills, you should still keep in mind that this may make it more difficult for you to find financing on large purchases like a car or home. Talk to a financial advisor if you are uncertain about whether you should cancel your card.

2. Pay Down the Balance

While you can ask to have a credit card closed to new transactions, the account will not fully close until the entire balance is paid. If you have multiple cards to pay each month, some experts recommend the snowball method. With this tactic, you focus on paying off the smallest debts first and then use the extra money to tackle larger bills.

3. Remember to Redeem Any Rewards

Rewards on cards that offer perks like travel credit or cash back don’t have to be forfeited entirely when you close your card. Look at the requirements on your rewards to see if there are any thresholds you are close to reaching. You may only be a few miles from a plane ticket or a couple of dollars from the cashout minimum. Talk to your credit card company as some offer a statement credit in exchange for your accumulated miles.

4. Contact Your Bank to Cancel

Call or go into your credit provider and let them know that you wish to cancel your credit card. You’ll need to confirm that your balance is actually zero, as there is sometimes a small residual interest that may accrue after your last bill. Once you have ensured you don’t owe anything, closing your account may take some effort, and the person you speak to may even offer you a new rate or rewards in an effort to keep you.

5. Don’t Accept Their Offers

Remember that credit card companies expect to make their money back on any bonuses they offer in the form of interest paid in the future. The best reason to keep a credit card is to build credit, as they aren’t designed to save you money primarily. A Scenario where you might want to consider their offers may be if you have multiple cards, and the new offer from the credit card company makes keeping the card open a better deal than another card.

6. Write a Letter for Your Records

To cover all your bases, it can be a good idea to have a form of written proof that you requested the account be closed and when you closed it. Because your credit score is so important and hard to build, having written proof leaves little room for error that could have negative repercussions. You may even enclose a check for the last payment on the card. Send the letter via certified mail or request a receipt to prove that the bank received it.

7. Check Your Credit Report to Ensure the Account Is Closed

You may want to get a free copy of your credit report to make sure the account is marked closed. It will take seven years for any late payments or delinquencies associated with that account to disappear from a credit report. The good news is that good credit history will remain on your credit report longer. A closed account that was in good standing will remain on your credit report for ten years. This will help shift the majority of your credit information to positive as time passes.

Can Canceling Your Card Hurt Your Credit Score?

It is possible that canceling your credit card may lower your credit score. Because credit is essential for establishing financial responsibility to lenders, renters, and creditors,  maintaining a good credit score is essential. A good credit score is generally considered to be anything above 700. If you have a good credit score, you may not need to worry as much about closing a card. However, many factors affect a credit card score and everyone’s financial situation is different, so consider the length of your account history, your credit utilization ratio, and any upcoming purchases that will require a good score before canceling a card. Here’s a more in-depth list of things to consider before canceling your credit card.