In today’s credit-heavy society, many people are giving thought to canceling one or more credit cards they either don’t use or have become dissatisfied with. However, it’s not as simple as you might think to cancel a credit card, partly because those companies would like to keep you as a customer, and also because canceling cards may adversely affect your credit rating. Here are a few suggestions for canceling cards safely and easily.

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First, make sure your card is paid off in full. If it’s not paid off completely, you may incur some financial penalties, including having your interest rate raised to the maximum allowable amount, which can reach more than 20%. It’s much easier to cancel a card that has no outstanding balance remaining.

After the card is paid in full, call the issuing company and notify them that you are canceling the account. There’s generally contact information on the back of the card. When you call, you’ll be in for an interesting conversation, because they don’t want to lose your business. They’ll often offer a lower percentage rate or a chance to bump up to a higher grade card. If their offer is attractive enough, this is a good time to be flexible and to think about canceling another card that won’t give such great terms!

If you listen to the company’s offer and still decide to cancel the card, the next step is to send a letter to the company to tell them that you want your credit report to show that you were the one who canceled the card on your own. That’s an important distinction, because you don’t want it to appear as if they canceled you, which will look bad to future creditors when they pull up your credit report. Don’t skip this step, because it may mean the difference of getting credit or not later on.

You can check your credit report later by getting your free annual report and making sure the information you requested is on there. The report must show that you canceled the account. You don’t want to see the words “closed by creditor,” which would indicate that the company closed the account and not you. If you see a mistake, immediate send a letter demanding the information be changed to reflect your voluntary closing of the account.

Canceling Credit Cards Impact on Credit Scores

On the other hand, there may be times in your life when you don’t want to close credit accounts, such as situations in which you’re trying to improve your credit score. For instance, creditors will sometimes look at having lots of available but unused credit as a positive thing. Let’s say that you currently owe $3,000 in credit card debt, but you still have $10,000 in available credit. If you cancel a card that has a $5,000 limit, that would lower your available credit to $5,000 in the eyes of future creditors, making it appear as if you’re more financially strapped than you really are. In other words, you owe $3,000 with a limit of $5,000 instead of owe $3,000 with a limit of $10,000.

Consider how long you have had a credit card before closing the account.

Credit cards with a long history count more in your credit score than newer accounts which may have better interest rates. If you have an aged credit card, negotiate with the issuer for a better interest rate so you can keep the older card instead of the newer one. So use discretion when you’re thinking about a canceling card just for the sake of canceling it.