Canceling Your Credit Cards

With all the credit offers that are difficult to resist, you may find yourself in a situation where you have too much credit extended. Canceling cards can help to reduce credit card debt and may seem to be helpful to your credit score. However, sometimes the opposite is true. Before you proceed to cancel credit cards, there are a few things you should consider.

In today's economy, credit card companies are reducing limits right and left. Before canceling any credit lines, make sure you have a sufficient savings to hold you over in the event of an emergency. Otherwise, you may cancel cards and then find that the credit is not there when you need it.

Additionally, your credit score may be impacted negatively by canceling credit cards. While it is true that too much credit can appear negative on a report, it is also true that too little can. Part of your credit score is a reflection of the amount of credit you use compared to the amount that is available. If you cancel all cards, with the exception of a few that carry high balances or are maxed out, you may actually be hurting your credit score.

Do not attempt to cancel any credit card, while you are still carrying a balance on that account. Although it may seem like you are doing your part to avoid further debt, many cards have penalties for early cancellation. Interest rates may spike if you cancel while your account is still active.

If you have taken all warnings into consideration and still feel it is in your best interest to cancel your credit card account, call your lender. However, card issuers often offer superior incentive programs at the time that you attempt to cancel your account. Sometimes they will do whatever they can to keep your business, so listen to the offer before making a final decision.

Finally, ask your credit issuer to report to the credit bureau that the account was closed at the consumer's request. This should automatically be taken care of in this manner. However, it never hurts to ask. If your credit report shows an account as “closed by creditor,” instead of by you, it may have a negative impact on your score.