Do you have too many credit cards including department store cards? If you want to cut up a credit card, make sure you understand how to cancel a credit card without hurting your credit score. Just follow these steps.

Step 1: Pay off the card in full. This means you bring your balance down to zero.

Step 2: Check to make sure the balance is zero by calling Customer Service or checking your account a balance online. Call Customer Service to make sure the balance is really zero. Interest may have still been accumulating.

Step 3: Cancel the account over the phone—not by email or online—once you confirm that the balance is zero. At this point, the credit card company may try to entice you to stay by offering you some special deals like a lower interest rate. Funny how they don’t offer these deals to you even if you ask for them, until you announce that you want to close your account

Step 4: Confirm that the account is closed by writing the company and asking for written confirmation that the account is closed. Be sure to keep a copy of whatever communication the card company sends you. File it away, because you never know when you might need it.

Step 5: Check your credit report after a few weeks to be sure that the account is really closed. It can take a while which is why you should wait a few weeks. You can check your credit report for free, by law, once a year. Be wary of companies that want to overcharge you to get your credit report from one of the three credit reporting agencies. Experian, Equifax, and Trans Untion. The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

It’s a pervasive myth that closing a credit card account will automatically lower your credit score (also known as a FICO score). This is not necessarily true. It’s only true if your credit utilization ration is affected. This ratio is calculated by taking your total used credit and comparing it to your total available credit; the higher this ratio is, the more it can negatively affect your FICO score. Essentially, by closing an old or unused card, you are eliminating some of your available credit thus increasing your credit utilization ratio.

“To close card accounts and not affect your credit score, you need to only have zero balances on your credit report for all of your active credit cards. If you have zero balances your credit utilization rate is zero, and you can’t raise it — and potentially hurt your score — by closing one or more of the active card accounts.

But you may be asking yourself: if I can bring the card to $0 balance what would I really gain from closing it? It’s not like the credit card company will charge interest on a $0 balance card. Also, one barrier to keeping a card active without a balance is the annual fee. So, if you want to avoid an annual fee, then go ahead and close it. Finally, in closing, let me say that having 1-20% of credit utilization ratio is the best. So simply make sure that after closing the card you don’t want, your credit utilization ratio is still between 1-20% should do the trick.

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