How to Close a Credit Card with a Balance
Can you close a credit card with a balance? Keep reading for a step-by-step guide to closing a credit card with a balance the right way!
March 21, 2022
When you’re done, you’re done. Whether an increased annual fee pushes you over the edge or you just don’t use the card anymore, there are plenty of reasons why you may want to say goodbye to one or more of your credit cards.
The big question is, can you close a credit card with a balance? Yes, you can and we’re going to walk you through what closing a credit card with a balance looks like and what happens to that balance after you close the account.
Why close a credit card with a balance
If you still have a balance on a credit card, it seems natural to keep the card open until it’s paid off. However, there are a few reasons to close a credit card account while you still have a balance on it.
To escape annual fees. If you close a credit card before or soon after your anniversary month (when you pay your annual fee), you can skip paying a hefty fee for a card you no longer want to use.
To avoid temptation. Having available credit can lead to spending temptations. If it’s hard for you to resist using your credit card, even when you can’t afford the charges, you may want to get rid of that temptation altogether.
To have fewer accounts to manage. If you have a lot of credit cards and other types of credit products available, you may want to simplify your financial life and scale back to only the credit products you utilize the most.
How closing a credit card with a balance affects your credit score
While closing a credit card can affect your credit even if you don’t have a remaining balance on the closed card, having that balance can cause damage. One way that closing a credit card can hurt your credit score is it causes your credit utilization rate to rise. You want to have as low of a credit utilization rate as possible and when you close a credit card, you lower your amount of available credit, effectively raising your credit utilization rate. If the closed credit card has a balance, you’ll raise that rate even higher than if you closed a card with a $0 balance. Keeping a high credit utilization rate isn’t always a good enough reason to keep a credit card open, but it’s something to think about.
What happens after you close a credit card with a balance?
When you close a credit card with a balance, you’re no longer able to use that credit card to make a new purchase or to accept a balance transfer. Even though you can’t use the card anymore, your original card agreement still applies. In other words, you’re still legally required to pay off that balance.
Here’s a quick look at what to expect after you close a credit card with a balance.
You’ll receive regular monthly statements. Just like before you closed the credit card, you’ll receive a monthly statement that outlines your balance, accrued interest, and the minimum payment you need to make. These monthly statements will stop when you pay off your balance.
Interest will continue to accrue. As long as you maintain a balance on the card, interest you’re obligated to pay will keep accruing.
Your fees will remain the same. Your credit card issuer can’t tack on any new fees or change the rate of your existing fees, but you may still have to pay annual or monthly fees until the card’s balance is completely paid off. Missed payments can lead to fees, so try to keep on top of your monthly payments.
How to close a credit card with a balance
If you’re certain you want to move forward and close a credit card with a balance, here’s how to do so the right way so you don’t run into any problems down the road.
Create a plan to pay off your debt. Before you close your card, sit down and map out how you’re going to pay off your credit card balance. If at all possible, pay off the balance before you close the credit card. If you need help, contact your credit card issuer to see if they can assist you with a repayment plan.
Redeem outstanding rewards. If you earned cash back, rewards points or receive perks like discounts for certain products, redeem any outstanding rewards and offers before you close your credit card.
Contact your credit card issuer. Give your credit card issuer’s customer support team a call and tell them you want to close your account and to confirm your request with a notice in writing. Specify that you want them to make a note that the account was closed at your request.
Follow up in writing. To confirm your credit card account truly is closed, you can write a letter to the credit card issuer confirming your cancellation in writing. You’ll want to include your name, phone number, address and credit card account number, along with key details about your call with their customer service department. Again, make note that you want the account closed at your request. You should receive a confirmation letter within a month or so, but if you don’t, follow up with your credit card issuer.
Step 5. Destroy your credit card. You need to destroy your credit properly as a safety precaution. Some home shredders can handle shredding credit cards (check if your model can do this); it’s best to shred or cut up your credit card and then divide the pieces between different trash cans so no one can piece together your card information.
Do you have to close your account to get rid of a specific card?
If you’re still on the fence about closing a credit card account with a balance, you do have another option available. If you’re unhappy with your specific card but not your credit card issuer, you can always ask to upgrade or downgrade your credit card, which won’t count as closing or opening a new account. You may be able to switch to a card with no annual fee or one with a better rewards structure for your spending habits.
Tally† is ready to help you pay down your credit card balances today so you can go back to enjoying your credit card without the annoying interest payments! Tally is a credit card debt repayment tool offering a lower-interest line of credit that can help streamline your repayment process.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.