While lines of credit are a staple in American society, having too many credit cards can become an issue. The natural solution is to attempt to cancel a credit card. Closing a credit card can assist in controlling costs, reducing the chance of identity theft, and becoming financially responsible. For those hurting from financial debt, canceling a credit card can be the first step in stopping the bleeding to prevent overspending.
However, closing a credit card can have lasting effects on an individual. Read on to learn more about the impact canceling a credit card can have.
Closing a credit card can provide benefits but also can have some downsides as well. While the process of canceling a card can be relatively simple, here are some factors to consider before making a rash decision:
Credit card companies do not earn on unused credit cards. Companies might be incentivized to allow the canceling a card, depending on the reason why the card is canceled. Some reasons why a card might be canceled:
Credit card companies assess their credit card portfolio on a regular basis to eliminate cards that might not be fit with their customer base. If this occurs, the credit card company is most likely to provide a notification prior to eliminating the card to inform consumers of alternatives, including moving the same account to a different type of card owned by the company.
Credit is a financial instrument that allows consumers to make payments without cash on hand. However, credit card companies require minimum payments each month that the consumer must meet. Continued default on missed payments can lead to credit card providers referring an account to a collection agency.
Some credit card companies may eliminate privileges for consumers who are 60 or 90 days past due but may allow the consumer to resume after the account is brought current. However, after 180 days or six months of non-payment, some credit card companies terminate the account entirely.
Creditors cannot raise consumer’s interest rate due to late payments on other accounts (unless the accounts are with the same credit card issuer). However, continued missed payments can lead to an account being closed completely if the risk of default can be shown. As mentioned above, a credit card company can close an account and refer the account to collection agencies.
Credit card issuers are required to provide 45 days before making a price adjustment to a credit card, such as hiking a fixed interest rate or annual fee. If a consumer elects to decline the change in terms and conditions, the credit card may be terminated.
Credit card issuers are required to provide 45 days before making a price adjustment to a credit card, such as hiking a fixed interest rate or annual fee. If a consumer elects to decline the change in terms and conditions, the credit card may be terminated.
With all these factors to consider, canceling a credit card is a relatively simple process. While there may be financial debts that can create complexities, general principles still apply. Consumers who are facing complicated financial issues should be prepared to have discussions with the credit card company. Below are the following steps:
There is no right or wrong answer when it comes to closing a credit card with a balance. While keeping the account open can help an individual’s credit score, the yearly charge and the liability can prove to be too much for some individuals.