When consumers open a credit card account, sometimes they will do so to take advantage of a special store promotional offer. After that purchase is made or that promotional offer ends, the credit card may not be as useful as it initially was. It has served it’s purpose but other credit cards have better terms.
So what do you do with credit cards you no longer need or use?
Credit Score Damage
It may seem simple to just close out accounts you no longer use but in doing so you can actually harm your own credit score and history. Have less than perfect credit these days can be higher costs across the board for future lending needs. Creditors are taking closer than ever looks at credit histories when determining creditworthiness. If you close credit accounts you have had for a long period of time, you can damage your score because part of the calculation considers how long your accounts have been open. If you close the oldest one, you can cut down your credit history and thus lower your credit score. Also, if you carry balances on other cards you use, closing accounts can change your debt to credit ratio.
The Good News
Select the Ones to Close Carefully
Once you take into consideration both the upside and downside of closing some of your credit card accounts, you have to be sure to select the right accounts to close. For instance, any credit card that still has a balance should not be closed if a balance remains. If you close an account with a balance, the creditor may raise your interest rate as they no longer have an incentive to keep you as a happy customer. Consider all of the cards you currently have and their respective rates and terms. If you must close a credit card, pick the one that you use the least and costs the most to hang on to.
Stand Your Ground
When you ultimately do decide to close accounts, make sure you are prepared to deal with the last minute sales pitch. Customer service representatives may offer you additional incentives to stick with your card. You should listen to what they have to offer because if the new deal they offer you is better than the terms you have currently, it may just be worth it to keep the account open. If their offer just isn’t appealing enough, stand your ground, politely refuse, and ask for the account to be closed.
Ask For Proof of Closure
When you close any credit card account, make sure you ask the credit card company to send you written confirmation that the account has been closed and when. You also should ask the credit card company to note your account was closed at your request and report it to the credit reporting bureau as such. In several months, request a copy of your credit report to ensure your request was honored.
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