How To Close A Credit Card With A Balance?
Before closing your account, you are not
required to pay off your credit card balance. But closing the account is
generally not advantageous if you decide to move forward with it, you'll still
have to pay the balance if there is one and the card issuer may keep adding
interest to your bill.
There are a few considerations to make before closing a credit card with a balance.
You won’t be able to use the credit card to make purchases after you close it,
to start with. Second, the remaining balance is still your responsibility to
pay off. Third, interest may continue to be charged on the unpaid balance. It
is still essential to pay off the outstanding amount as soon as you can.
Benefits of canceling your Credit Card
There are some circumstances in which you
might want to cancel a credit card that has a balance.
Eliminate annual fees
If you cancel your credit card before or
shortly after your first anniversary with the card, you might be able to skip
paying an annual fee.
Nothing to tempt you to use the card
Closing the credit card might be a good choice
for people who frequently end up spending when they have available funds.
Fewer accounts to oversee
Keeping fewer accounts open might make it
simpler to manage your finances. But until the balance is paid off, you'll need
to make payments.
Does closing a credit card affect your credit score?
Your credit score may be impacted by closing a
credit card, and closing an account will not undo any damage the account has
already done to your credit. Your credit report will reflect late payments for
about 7 years. Accounts that are still active after 10 years will be deleted.
The amount of credit you have used with the total credit amount you have
available across all credit accounts is used to calculate your credit utilization ratio. We advise
against using more than 30% of your available credit, as a higher number could
harm your credit.
Is canceling your credit card a smart decision?
Depending on your financial situation, you
should decide whether or not to close a credit card. But before you do that,
you should give it some serious thought. You might occasionally be able to
change an account to a new card, which may be a way for obtaining a card with
different terms or a lower annual fee. Contact your card's issuer to discuss
options that might help you keep your account open while using a different card
if you're worried about fees, rates, or other card-related problems.
Conclusion
In cases where it is possible, always pay off
balances in full each month. Interest remains due even after an account is
closed. Non-payment of a bill may result in fees or other adverse effects on
your credit or balances. Closing credit cards can impact credit both favorably
and unfavorably. Therefore, before doing so, make sure you are aware of your
entire financial and credit situation. Before closing accounts in good
standing, make sure you've redeemed all outstanding rewards.
Read More: How Do Balance Transfer Credit Cards Work?
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