There are many rules and regulations that you people need to follow to maintain good credit and keep their finances in good order. One piece of advice to those who want to keep a good credit rating is by not closing too many credit card accounts at one time. By closing the wrong credit card accounts, you will interfere with your credit score. But there are occasions where consumers are ready to close out old accounts that are not active. Some people will want to close an account that still maintains a balance in hopes that the closing will help them get a jump ahead on their debts. However, that theory may not make much sense in reality.
So, can your really close a credit card account when your card still contains a balance?
The answer to that question is “not really”. While you can close your credit card account against any future purchases, cardholders cannot truly close out an account until the balance is paid in full. Some people will make the mistake of assuming once the account is closed, the credit card company will issue a traditional “final bill” and no additional fees will be incurred. However, that is far from the truth.
Credit card accounts that are closed with a remaining balance are still open to incur late fees and other penalties if you continue to dismiss the balance due. These penalties and fees can quickly add up, turning what once was a relatively small balance into a ridiculously large amount owed to the card issuing bank. Not only will you be responsible for all of the fees incurred, you will also see a dramatic decrease in your credit score.
Pay off the balances on any credit card accounts you wish to close first. It is too easy to forget or put off those small payments, especially if the card account has already been closed. Even though the card might be off of your radar screen, you still risk incurring the additional late and missed payment fees. Additionally, your account will likely be turned over to collections, who can be aggressive in getting the money paid so they can make their commission. It is in your best interest and the best interest of your credit score to pay off balances in full before closing any account.
If you are looking to reduce some of the credit cards you have actively open, you need to consider what damage it can do to your credit and work to make sure you are closing the right accounts. You will want to revisit the terms and conditions of each card and decide which ones to keep by comparing interest rates and other information. As years go by, it is easy to miss opportunities for better rates and rewards programs from another company. If you are closing the account because you are unhappy with the credit card company or the lack of incentives, don’t give up hope just yet. Instead, take the time to contact your credit card lender and discuss your dissatisfaction with the present situation. If the lender is reluctant to lose you, this is especially true if you have been an excellent customer in the past, they may be willing to match other offers you have been considering, including lower interest rates, better incentives, or higher credit limits. It doesn’t hurt to ask. You may even score a better deal with your current credit card company than you would with a brand new company.