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How to cancel a credit card in Australia
Cancelling a credit card isn’t as easy as cutting it up and throwing it in the bin. To cancel your credit card, you need to contact your lender. This can be done online, over the phone, by visiting your lender’s branch (if one exists) or by mail. But before you contact your lender, there are a few things you need to do first.
MoneySmart advises that you should pay off any remaining debt or move your debt across to a balance transfer credit card, and use or transfer any remaining rewards points (if you have them). Make sure you also cancel or transfer all direct debits linked to your card, as you could potentially be charged non-payment fees if you miss a payment.
Before contacting the lender, it may also be worth checking their Product Disclosure Statement (PDS) to see what their process is for cancelling credit cards and any terms and conditions that apply, such as a cancellation fee.
Once you’re ready to contact your lender to cancel your credit card, you’ll usually have a few different options available. If you decide to cancel online, this may be available via your lender’s website or mobile app, simply by selecting your credit card account and closing it.
If you chose to cancel via phone, there may be a number listed on the back of your card that you can call. Generally on the call, you’ll need to verify your identity and clearly state your intention to cancel the card.
If your lender has physical branches that are conveniently located, then you can cancel your card in person by speaking to a branch representative. You’ll need to verify your identity, but this could be a more straightforward process than doing it over the phone.
In some cases, you may want to cancel via a written letter. This can be done by including your credit card number, account number and a request for your lender to close your account.
However you choose to cancel your credit card, it’s important to obtain written confirmation from your lender that the card has been cancelled. This should arrive in the mail or via email in a final statement. If it does not arrive, follow up with your lender.
The final step is to destroy your card. Some lenders may ask that you return it to them ‘cut diagonally in half’, while others may need it returned if it’s made of metal. Read the PDS document or contact your lender to check for any specific instructions for disposing of your card.
What about cancelling a joint credit card?
If you have a joint credit card, typically both cardholders will need to agree to a closure before informing the lender that they wish to cancel the card. Both cardholders will need to confirm their identities as part of this process. An exception to this general process is when one account holder passes away or cannot be contacted, in which case you can speak to your lender about cancelling it yourself.
Does cancelling a credit card hurt your credit score?
Your credit score is calculated based on a wide range of different factors. Credit bureaus are unlikely to view the act of cancelling a card itself negatively. Thanks to comprehensive credit reporting, closing unnecessary credit facilities and meeting repayment obligations may even make a positive impact on your credit score.
Keep in mind that each credit application is recorded on your credit report for lenders to view. Your credit application history is typically one of the main factors used when calculating your credit score. Regularly opening and closing credit card accounts could be viewed negatively, as lenders may assume that you aren’t a reliable borrower.
You can check your credit score for free with Canstar or via the Canstar app.
What happens if you forget to cancel your credit card?
While simply cutting up a credit card might prevent you from making any more purchases, it doesn’t stop you from being charged fees and accruing interest on balances you still owe. If you no longer really need or want a credit card, cancelling the card could cost less than keeping it open.
Leaving an unused credit card open could leave you at increased risk of undetected fraud. For example, identity thieves or scammers could use details from a card that you no longer think is active to run up debts in your name, which could affect both your finances and your credit score.
Why might you want to cancel your credit card?
There are any number of reasons you might want to cancel a credit card. You may want to move to a new lender, or you may simply not want a credit card anymore. If you have a credit card with a high limit and want to apply for a new loan, the lender could consider your existing credit card limit as a liability. In cases like these, closing the credit card account could help improve your new loan application’s chances of approval.
Other reasons why you might consider closing a credit card include:
- Being in too much debt or paying too much interest.
- Wanting a lower rate card.
- Wanting a different card with a better rewards system.
- Paying too much in annual fees.
- Changing your spending habits.
Whatever the reason for cancelling a credit card, it’s important to weigh up your options before beginning the process. There are valid reasons for and against having a credit card. Using one responsibly can give you quick access to funds if needed, as well as a range of features that may prove valuable to some borrowers.
