6 steps to close your cards the right way

Credit can be a useful thing, but when it starts to feel as though there are too many cards to keep track of, it may be time to close a few accounts. Before picking up a pair of scissors though, remember that cancelling cards is more complicated than snipping them in two. Instead, the process is all about planning, recording and patience. cut-card

Why go to all that trouble?
There are a number of good reasons to close an account, says Elena Jara, director of education for Credit Canada Debt Solutions in Toronto. For instance, you might be worried about identity theft or credit fraud. In other words, you may have stopped using your card over two years ago and have nearly forgotten about it, but thieves won't. Every card is a possible doorway to your personal information. There's also another very practical reason: "Some credit cards charge you an annual fee. If you're not using these cards, why pay for them?" Jara says.

Assuming that closing the credit card account is the best move, follow these steps to do the job right.

Step No. 1: Consider your credit history first
Canceling the credit card that you've had the longest may shorten your credit history, thus negatively impacting your credit score. It may be wise to keep your oldest credit card account open, provided it's not costing you an annual fee, and using it for small charges from time to time to keep it active.

If your oldest card is definitely the one you want to close, then be prepared for your credit score to take a hit. It shouldn't be a big problem if you're not applying for a mortgage or a car loan anytime soon, and your credit score will recover over a period of time.

If you are choosing to close several credit cards, never close them all at once or your credit score will take a nosedive. Space the closings out over six months' time, and do keep at least one card account open if possible so you are not completely obliterating all your available credit.

Step No. 2: Zero your balance
Once you decide which card(s) you want to close, know that card issuers typically will not close a credit card if there is a balance on it. You can ask the bank to freeze the account and not allow any new charges, however. Then pay it off or transfer the balance to a card or credit line with a lower interest rate.

Step No. 3: Call it in
If you're planning on closing your account, you'll want to let your issuer know by calling the telephone number listed on the back of your credit card. Keep a pen and paper handy so you can record the date, time and name of the person you speak to. Before mentioning that you plan to close the account, ask the card's customer service rep to tell you if you have any final interest owing. If the card is completely paid up, explain that you now want to close the card. Be prepared for some convincing arguments against this plan.

If you've held firm with your decision to close your account, ask for the card issuer's address so that you can send a follow-up letter.

Step No. 4: Get it in writing
Draft a letter to the card issuer and cc the two credit bureaus, Equifax and TransUnion. Not only are you ensuring that the service rep hadn't forgotten to close your account, you want to make the credit bureaus aware the account is being closed on your terms and with your blessing. Send the letters by registered mail.

Step No. 5: Check in later
According to Jara, it takes approximately 45 days for the credit bureaus to update client files, so check in with them about two months after you send the letter. If the account still seems to be open, follow the pervious steps again.

Step No. 6: Destroy and conquer
Got the all clear? It's time to grab those scissors and cut the cards. "Cut them, shred them, destroy them and throw the pieces away in different waste bins," Jara explains. "That way no one can access the card's information in any way, shape or form. You don't want to take any chances."

See related:  Carmen Wong Ulrich on why we spendHow many credit cards is too many?

Published December 5, 2012

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