You might have your reasons to cancel your credit card, but, if you fail to cancel it in a right way your credit score can be damaged.
Just by destroying your credit card at your end does not mean that your credit card is closed. Canceling your credit card requires particular steps to be followed so that your credit score is not hurt in the process.
Individuals may cancel their credit cards for a number of reasons such as due to high fees, excessive shopping habit, or high interested rates.
Here are few things to consider before closing your credit card:
1) Clearing dues
If there is any outstanding balance in your credit card, banks will not cancel the card unless you pay the complete amount.
Before closing check whether your outstanding balance is zero or not. It is always better to stop using the credit card before hand. Wait for your bill to be generated for that month. One can submit the bill copy along with closure form.
2) By visiting bank
It is always suggested to visit the bank to close the credit card as you will receive a acknowledge copy which will help you in further follow-up.
However, one can cancel the card through phone banking as well. Posting a closure form will also help but keep a photocopy of the form with you for further reference.
Better to follow up with the bank or customer care until you get confirmation on cancellation.
3) Redeem Points, if any
In a hurry to cancel the card, do not forget to check if you have rewards or points in your card. Clear all your cash back, rewards or points which you are entitled to.
4. Annual fees payment
It is advisable to cancel the credit card ahead of the annual payment charge or else the bank would levy an annual payment fees.
How it impacts your credit score?
Cancelling your credit may hurt your credit score as it reduces your total credit limit and raises your utilization ratio. Cancelling your credit card also means that you are not able to pay your debts or you are credit hungry.
If you are planning to close more than one credit card, it is better to do gradually.
It is better to close your unused credit cards. But note that closing a newer credit card is a better idea as older credit card help to judge your track record.