If you’re thinking about canceling a credit card — or two or three — it’s not as simple as just cutting up the plastic and tossing the tiny pieces.
There are a few additional steps you should make to ensure you’re not tanking your credit score.
Whether you’re sick of the measly travel rewards (travel in 2020 is history, anyway), struggle to keep up with your payments or simply want to cut back on accounts, use this simple step-by-step guide to cancel your credit card the right way.
Your 6-step guide to canceling a credit card the right way
Before you cancel your credit card, you need to make sure this is a smart move for you and your credit. And if you determine it is, it’s not just enough to cut your card up into tiny pieces.
Use this guide to help you cancel your credit card — the smart way.
1. Ask yourself a few questions to see if this could hurt your credit
Although it might seem like canceling your credit card will help your credit score — less chance of slipping into debt — the truth is, it could actually hurt it.
First, you’ll want to take a look at your credit score and the factors that affect it. Focus on:
Payment history: Do you have any late payments or negative marks you need to take care of before canceling your card?
Credit usage: Aim to keep your credit usage rate (or credit utilization rate) below 30%. If you’re thinking about transferring your credit card balance to one card, it could send your credit utilization rate skyrocketing, negatively impacting your score.
Credit age: Your credit age also affects your credit score. If you’re thinking about closing the credit card you opened back in college — the oldest of the bunch — then you might risk hurting your credit.
2. Get your balance to $0 (and if you can’t, this company will help)
Unfortunately, you can’t just cancel your credit card and the balance attached to it, so you’ll want to make sure you’ve paid it off completely.
You’ll also need to make sure you don’t have any other accounts linked to it, especially ones that could auto-charge. (Think: utilities or subscription services.) Stop all charges to it and get that balance down to zero.
If you don’t have the cash on hand, consider consolidating your credit card debt. This way, you can get rid of it — and insane amounts of interest you’re probably accumulating — as soon as tomorrow.
Not sure where to start? A website called AmOne wants to help.
If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster.
AmOne won’t make you stand in line or call your bank, either. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could help you pay off your credit card debt years faster, meaning you can cancel it in 2020 — not in 2025.
3. Cash out your rewards
Sure, 2020 hasn’t been the year for travel, but you can still plan a trip in the future with your earnings. Many airlines and hotels are waiving change fees, so you can feel confident booking something for 2021 and change it if you need to.
If you don’t want to plan travel, some cards also offer cash back or gift cards, though the exchange rate might not be as strong if you were to use the points for travel. Still, take the money! You can use it to pay off other cards or treat yourself to something fun.
If you close the account without using your rewards, then you’ve built them up for nothing. It’s like leaving a hotel room without taking anything from the complimentary mini-bar. What a waste!
4. Take a deep breath and contact customer service
The credit card companies want your business, so they might try to convince you this is a bad idea or win you over with additional perks, like a waived annual fee. But you’ve thought this decision through, so stand your ground and stay firm on your need to cancel.
Insist on written confirmation that the account is closed with a $0 balance so you don’t end up with accidental interest or damage to your score.
5. Check your credit report
About 30 days from now, you’ll want to pop into your credit report for proof that your card has been closed.
You should always be keeping up with where your score stands, but this time in particular is when you should really comb through it to make sure everything is correct.
6. Destroy the evidence
Just kidding, but you do need to cut up your credit card properly. Some companies will send you an envelope to return the card if it’s made of metal, but if not, take this opportunity to cut up that card into tiny pieces. Be sure your name and account number aren’t on the same shard — then say sayonara!
Congrats! You’ve officially canceled a credit card properly and have one less bill to worry about next month.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.