If you’re thinking about canceling a credit card — or two or three — it’s not as simple as just cutting it up and tossing the tiny pieces.
There are a few additional steps you should make to ensure you’re not tanking your credit score.
Whether you’re sick of the measly travel rewards (travel in 2020 is history, anyway), struggling to keep up with your payments or simply want to cut back on accounts, use this simple step-by-step guide to cancel your credit card the right way.
Your 6-Step Guide To Canceling Your Credit Card the Right Way
This might seem like it’s going to be a big ol’ chore, but really, this shouldn’t take you more than a lunch break (or an episode of “Schitt’s Creek”) to figure out. And you’ll feel much better for it.
1. Ask Yourself a Few Questions To See If This Could Hurt Your Credit
Although it might seem like canceling your credit card will help your credit score — less chance of slipping into debt — the truth is, it could actually hurt it.
First, you’ll want to take a look at your credit score. Try using a free website like Credit Sesame.
Within two minutes of signing up, you’ll get access to your credit score. Click “What’s impacting my score?” to see a breakdown of what factors are affecting your score.
Because you want to cancel your credit card, you’ll want to focus on:
- Payment history: Do you have any late payments or negative marks you need to take care of before canceling your card?
- Credit usage: Aim to keep your credit usage rate (or credit utilization rate) below 30 percent. If you’re thinking about transferring your credit card balances to one card, it could send your credit utilization rate skyrocketing, negatively impacting your score.
- Credit age: Your credit age also affects your credit score. If you’re thinking about closing the credit card you opened back in college — the oldest of the bunch — then you might risk hurting your credit.
Click through each score factor, and Credit Sesame will give you recommendations. For instance, it might tell you to keep your card open, because it’s the oldest card you have and in good standing.
Use these credit insights to help you make the smartest move.
2. Get Your Balance to $0 (And If You Can’t, This Company Will Help)
Now that you know the ins and outs of your credit score, it’s time to address that balance that’s sitting on your credit card. Unfortunately, it won’t just disappear when you cancel your card. You’ve got to pay it off.
But if you’re struggling to get it down to $0, there are some ways to get rid of it — as soon as tomorrow — and a website called AmOne wants to help.
If you owe your credit card company $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off your credit card balance.
The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49 percent APR), you’ll get out of debt that much faster.
AmOne won’t make you stand in line or call your bank, either. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could mean you can cancel your credit card this week — not in 2025.
3. Don’t Leave Any Rewards on The Table
If you’ve collected credit card rewards, don’t leave them on the table — you earned those!
We know what you’re thinking: 2020 definitely hasn’t been the year for travel. But you can still plan a trip for next year with your earnings.
Plus, a lot of credit cards allow you to exchange your points for cash or gift cards. The exchange rate isn’t usually as good, but it might be kind of nice to use the extra cash to pay a monthly bill or treat yourself.
4. Take a Deep Breath and Contact Customer Service
Here’s the thing: Credit card companies want your business. So they might try to convince you this is a bad idea — or try to woo you with some extra rewards or a waived annual fee. But because you’ve determined this is the best move for your finances, stay firm!
You’ll also want them to send you an email confirming your account closure and that your balance is $0. It’s just always smart to get these things in writing.
In the next few weeks, keep tabs on your credit. Head back over to Credit Sesame, and make sure the account is marked as officially closed on your report.
5. Destroy All Evidence
Totally kidding here, but you will want to properly dispose of your credit card.
Some companies will send you an envelope to return the card if it’s made of metal. If not, take this opportunity to cut that card into tiny pieces. Just be sure your name and account number aren’t on the same shard.
In an odd way, this is kind of satisfying.
6. Explore Other Reward Alternatives
If at the end of the day, if you find yourself missing the rewards that came with your credit card, there are some smart alternatives out there you can look into.
For example, the Aspiration debit card comes with all sorts of perks — and you don’t have to worry about racking up debt
It gives you up to 5 percent back every time you swipe your card. Need to buy groceries? Extra cash. Need to fill up the tank? Bam. Even more extra cash.
Plus, you can earn up to 20 times the average interest on the money in your account. Not too shabby!
Enter your email address here, and link your bank account to see how much extra cash you can get with your Aspiration account. And don’t worry. Your money is FDIC insured and under a military-grade encryption. That’s nerd talk for, “this is totally safe.”
Now, a big congratulation is in order, because you just canceled your credit card — the smart way!