How to safely cancel a credit card in 7 steps

Core Points - Closing a credit card can be a straightforward process but may impact credit scores, making it essential to understand the implications before proceeding [1][12] Group 1: Steps to Cancel a Credit Card - Review the cardmember agreement for specific cancellation instructions and reward handling [3] - Redeem any accrued rewards before closing the card to avoid losing them [4] - Pay off the balance in full prior to cancellation, as most issuers require this [5] - Contact customer service to officially close the account and verify identity [5][6] - Cut up the physical card to prevent fraudulent use after closure [7] - Update any recurring payments linked to the card to avoid missed payments [8][9] - Check the credit report after closure to confirm the account status [10][11] Group 2: Impact on Credit - Closing a credit card reduces available credit and can increase credit utilization, which affects approximately 30% of the FICO credit score [13] - An example illustrates that closing a card can raise credit utilization from 32% to 47.5%, potentially affecting loan approval chances [14][15] Group 3: Reasons to Cancel a Credit Card - Closing a card may be necessary during a divorce to eliminate shared financial responsibility [16] - High fees associated with certain cards can justify cancellation, especially if the card is not frequently used [17] - A product change may be a better option than cancellation to maintain credit history while reducing fees [18][19] - Fraud victims may need to cancel a card to protect against unauthorized charges [21] - Changes in card structure, such as unfavorable terms, can warrant closure [22] - Psychological factors, such as overspending temptation, may lead individuals to close accounts [23] Group 4: Managing Credit Cards - While closing a card can lower credit scores, it may be beneficial for managing high fees or spending habits [24]