Now is always the time to cancel temptation!  People often wonder if there is a proper way to cancel a credit card, and in answer to that, yes, there is a proper way to do so.  Let’s first of all talk about the how to.  Then we’ll discuss the best options with your credit score in mind.

You have decided you are going to cancel your Bank X Credit Card, so the first thing you need to do is have your account number, any passwords or access codes you may have set up with them, and your last statement.  Make sure that you have paid the balance off in full before calling them.  Then call the customer service number listed on the statement.  They should ask you for your account number, possibly a password, and some other verifying information.  After this, they will ask you how they can help you.  This is when you state that you would like to cancel your card.  They may offer you various offers to keep you with them, and this is when you have to have the determination to stick with your goal – cancel the card.  Be sure to write down the person’s name you spoke with, the date, the time of the call, and any confirmation codes they may give you.  The credit card company should mail you a written confirmation in approximately 7-10 business days.  Place this in your files and keep to make sure everything closes out properly on your credit report.  And finally, cut up the credit cards associated with the account you just canceled.

It really is quite simple; however, I’d also like to mention a few things in relation to your credit score and canceling a card.  First of all, there are many factors that go into your credit score, so it is impossible to totally control your credit score.  We do know that your score looks at various categories and uses a percentage scale of each category to determine your score.  Those categories and percentages are Payment History – 35%; Amounts Owed – 30%; Length of Credit History – 15%; New Credit – 10%; and Types of Credit Used – 10%.  One of the pieces that is important in this discussion is the Amounts Owed as that looks at the proportion of balances to your total credit limit.  For example, if you have a credit limit of $20,000 and you owe $10,000, then you are at a 50% ratio.  Then let’s say that card you closed with Bank X earlier had a $0 balance on it, but a credit limit of $5,000, then you have just increased your ratio to 67% which is not a good move.  The lower your ratio, the less of a risk you are.  The higher your ratio, the higher of a risk you are.  So the better move, would have been to pay off about $2,500 to $3,000 of your debt, then close that card.

So while closing a card is very easy, remember the impact it can have on your credit score at the same time.