Cancel Your Card but Protect Your Credit Score

Whether you want to cancel your credit card because of its high interest rate or you simply just have too many credit cards, it's important to do it correctly to avoid inflicting any damage to your credit score. What are the rules on cancelling a credit card?

Listed below is a step-by-step guide on closing an active credit account:

Never cancel with a balance. The number one rule is this: NEVER close your credit card account while you have an existing balance. If you racked up a huge amount of debt and you're having a difficult time catching up with your payments, see to it that you will not be using that credit card on new purchases. Focus on the task at hand, which is to pay off your balance one step at a time. Once you have completed your payments that should be the only time you can start thinking about closing your account.

Call your issuer. You can find your credit card company's customer service number at the back of the card or on your billing statements. Once you call up your issuer, verify that you have no remaining balance in your account. After making sure that you have zero balance, tell the representative that you want to cancel the card.

The credit card representative may ask for a reason as to why you want to close your account. Also, the representative may try to talk you out of your decision by offering to lower your current rates. Again, if you have really decided that you are closing the account, then be firm about it and just say that you have made your final decision.

Follow up with a letter. The next step is to send a follow-up letter informing your credit card company about your decision. When you call up your credit card company, ask the customer service representative for the name of the person and the address to whom you can address your follow-up letter to.

In your letter, inform your credit card company that you are closing your account and that you want to reflect in your credit report that you were the one who made the request. Be sure to provide your name, address and account number. Afterwards, send your letter via registered mail to be sure that your letter will reach the right recipient.

Check your credit report. You may have to wait for up to 30 days for your account to be completely closed. After this time, order a copy of your credit report from the three major credit bureaus (Experian, Equifax, TransUnion). See to it that the statement, 'Closed at customer's request' is reflected in your report and that your credit card account has been taken off from your file.

See to it that the remark does not say "Closed by Creditor". If it does, you need to call up your credit card company and inform them that you have requested to close the account but that there is a wrong remark in your credit report. Follow up your call with another letter (enclosed with your first letter) and send it again through registered mail. After a month, check your credit report again to see if the correction has been made.