Steps to follow when closing an account
When closing an account that hasn’t been used for a while, it makes sense to follow a few simple do’s and don’t’s to help you avoid unnecessary charges or fees. You should also consider the risks around identity theft and steps to mitigate that. Last but not least, be warned that it can also cause your credit score to fall if you’re not careful. Here are a few pointers for closing those lingering accounts:
- Always consider cancelling unused cards that are costing you money. If you’re carrying a card that has exorbitant interest rates or high fees, and your credit card provider isn’t open to lowering your interest rate or waiving these fees. You should seriously consider cancelling the account, especially if you don’t use the card.
- In some cases, you are within your rights to cancel any card which has an active balance. At your request, you can ask the creditor to close the account to new charges whilst you continue to pay off the balance each month. Essentially, your debt is carried over to a new mandate. This is always a good option if you are privy to using your cards regularly, as you reduce the balance without being tempted to spend on the card. However, pay attention to any additional fees in this case, and don’t forget to read the small print in your agreement prior.
- Try and keep a few accounts open. This is sensible and recommended to keep your credit rating intact and debt levels healthy. Indicators of responsible and active credit utilisation are regarded positively by creditors.
- Don’t forget to regularly check your credit reports for any updates or errors after you close accounts. You’ll need to wait for a period of around 30 – 60 days for the creditor to update their records and for the credit bureaus to reflect these changes on your reports. These actions may stay on your report for up to seven or more years, however, the status should read that the account is indeed closed.
- Instinctively close down the oldest account on your credit reports. This might result in your overall credit history to appear less comprehensive than it really is.
- Cancel multiple accounts all at once. If you feel the need to cancel a number of credit accounts, staggering the closures over time could reduce the chance of attracting airs of suspicion from future creditors.
- Toss away your unused credit cards and think they will close automatically. The best way to go about cancelling an account is to send a letter of notification to the customer service department of your credit provider. Doing this provides an insurance against any necessary fees or charges, should the creditor not respond with an account closing confirmation letter within 10 – 14 days. Don’t forget to follow up with a call if you don’t hear back from the creditor during this time.
- Transfer too many balances on one card. It’s sensible to keep your credit balances under the 30% threshold of your available limits.