I was talking with a friend recently about money and the subject of credit cards came up. Happiness and excitement filled her eyes when she told me that she had just finished paying off her two cards. That’s great news in anyone’s book! I shared her happiness, this was a big deal knowing the financial difficulties she’d been in recently! One thing that she wasn’t sure about was what she should be doing with these cards now. “Cancel your credit card” was high up on my short list of recommendations for her.
Keep your Credit Card?
There are options other than to just straight up cancel your credit card without any other thoughts. Sometimes there is a valid reason to keep your credit cards going.
If your credit card still has offers valid that you can make use of AND pay off in the remaining period, by all means keep the card. It wouldn’t be the best decision to cancel your credit card if a 0% on purchases or balance transfers is still valid for a reasonable amount of time. You would need to be the jude of this! If you have 5 months of interest free purchases left and want to pick up the new Samsung Galaxy S8+ and you know you can pay off the full price in that time? Keep the card, buy the phone! (That’s 5 payments of £162.80 if you wondered!)
Do you get any cashback or rewards on your credit card? Repurposing this card as a fuel purchase only card would make sense. Providing you eliminate the risk of paying any interest on the purchases by paying the balance in full each month, there could be a long future in this card and it could be worth your while.
Cancel your Credit Card?
High up on the list of reasons to cancel your credit card is fraud. There’s an alarming number of credit cards details being stolen and fraudulently used on an all too regular basis costing the credit card companies millions. Only once have my details been used without my knowhow, for some fancy seats in a West End theatre. I hope the crooks enjoyed the show, but although Barclaycard sorted everything out very quickly, it wasn’t a pleasant experience knowing that someone had used my details. To prevent this happening to you, choosing to cancel your credit card is the best option.
Interest. I hate paying interest on anything if I can help it. If you were to start using this card again, there’s a fair possibility that you would end up paying interest on it. The reason I created this blog is to help you get out of debt and not get you into it. Cancel your credit card and there’s no chance of you using it again to incur that interest.
With so many great offers available for “new” customers for credit cards, and so little incentive from the lenders to keep customers, just go ahead, cancel your credit card! When you have something you feel you need to buy on credit, just get a new 0% on purchases credit card.
What do do with an existing balance?
Some people aren’t as lucky as my friend to have paid off their card and still have an existing balance when their promotional period ends. This means you’ll be paying the interest on the remainder. You can escape this, but need to do some calculations and check the options below.
Balance transfer Credit Card
You can request a new credit card with a 0% interest on balance transfers to transfer the debt. This way, you can continue paying off the remaining balance without paying interest on the new card and you can cancel your old card. This does normally come at a price of usually around 3% of the total balance. So this comes with warning and you may just want to…
Just pay off the balance – Swallow the interest.
Dependant on your remaining balance, you might just be better off paying the interest to clear the card if you can do so in one or two months.Check the interest rate that you’d be paying monthly on the balance and work out if that equals more or less than the 3% of the total balance to see if you’d be better off with the balance transfer card.
How to Cancel your Credit Card
There are right ways and wrong ways of doing this. Some people cut up their credit card and think that they’re safe. This is NOT the way to cancel your credit card. By just cutting the card up, you are removing the possibility of a thief getting their hands on the physical card, but most fraudulent activity is done online. They don’t need the actual card for that. It’s scary stuff, but cutting up your card is the last step of the process.
Clear your Balance
You will want to ensure the balance is cleared. This will either be by means of a balance transfer card, or paying it off completely, woo hoo! 🙂
Make the phone call
You will want to contact the card provider, most will allow this to take place over the phone, and possibly online. There’s more chance of being offered a deal to prevent you leaving over the phone, this can sometimes work in your favour. In my experience though, “retentions” teams still don’t tend to offer anything close the the deals that new customers get. You will need to confirm the security questions on your account, so make sure you know these or have them to hand.
DON’T pay to call premium rate numbers if you can help it! I can almost always find a local rate alternative on SayNoTo0870.com that I can call from my mobile and use my plan’s inclusive minutes!
Once you’ve dealt with cancelling the account, you will normally get a letter to confirm this action. This contact should also state your closing balance. Ensure again that it’s ZERO! Nil, nothing. I closed an account before after paying off the balance, but the closing letter said that I owed them a £0.01. Yes, a penny! Supposedly this was something to do with the day I paid my balance and the day the interest was charged causing it. Not waiving the fee over the phone, the big spender that I am, walked into the branch and paid IN CASH! One whole Great British Penny!
Destroy, Destroy, Destroy
If you’re happy with your closing letter and balance, you can now fully cancel your credit card. Get the scissors/shredder/flamethrower/tank out and go mad. You will more than likely have a microchip on your card which I also recommend you cut through.
If you’ve paid off your balance, congratulations. I’d recommend that you look into Automating your Finances (if you haven’t already) and get that in place before pursuing a new credit card.
If you made it this far, thanks for reading! It means a lot to have you here.