How to close a credit card

Looking to switch credit cards or get rid of the plastic altogether? Here are the steps you usually need to take to close your credit card account for good.

Cancelling a credit card isn’t as easy as cutting it up and throwing it in the bin – this is actually the last step. While this might prevent you from making purchases, it doesn’t stop you from being charged fees and any existing interest you owe will keep adding up. You could also leave yourself open to the possibility of undetected fraud, as thieves could use details on a card you are no longer aware exists.

You need to contact your lender in order to cancel your credit card, and some of them may require you to do this over the phone or in writing. However, from January 1 2019, all card providers must give customers the option of cancelling their card online.

Generally, if online cancellation isn’t available, you’ll have to either:

  • Cancel your card by phone
  • Visit your lender’s branch (if one exists)
  • Cancel via a written letter

It’s also worth checking out your provider’s PDS (product disclosure statement) to see what their process is for cancelling credit cards, and any terms and conditions that apply, such as a cancellation fee.

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Steps to cancel your credit card

Before you actually get to contacting your provider, there are a few things you need to do first. ASIC’s MoneySmart adivses that you should follow these steps:

  1. Pay off or transfer any outstanding debts: you’ll need to have $0 on your card to cancel it, and providers can require you to pay off any remaining amount. If you can’t pay off all of the debt, then you can consider making a balance transfer onto another card.
  2. Transfer any rewards points or activate them: why waste rewards points you’ve earned? While this step isn’t necessary, you might consider moving them to another card if you can or using them before the card is cancelled.
  3. Cancel all direct debits on your card: move your direct debits to another card or cancel them altogether. If you miss a payment to a provider because your card is no longer active, the services may be cancelled and you could even be charged fees for non-payment.
  4. Contact your lender:  we go over this in greater detail below
  5. Check for confirmation: never assume your card has been cancelled unless you’ve received confirmation from your card provider, which should come in written form.
  6. Destroy the card: Some providers may ask that you return the card to them ‘cut diagonally in half’. Read the PDS document or contact your provider to check for any specific instructions for disposing of your card appropriately.

Looking to get on top of your debt but still need a credit card? If used responsibly, you might want to consider a balance transfer to another card or provider. The table below displays a snapshot of 0% balance transfer offers listed on Canstar’s database, sorted by length of promotional period (longest-shortest) then by provider name (alphabetically).

Cancelling a credit card by phone

To cancel your credit card via phone, there may be a number listed on the back of the card for you to call in Australia. If you call this number, generally you’ll need to clearly state your intention to cancel the card(s) and verify your identity.

You should then ask for written confirmation from your provider that the card has been cancelled, which should arrive in the mail or via email in a final statement. If it does not arrive, follow up with your provider.

Cancelling a card in your local branch

If your provider has physical branches that are conveniently located for you, then you can cancel your card directly by going into the nearest one and speaking to a representative. Again, you’d need to verify your identity and have your card on you, but this could be a more straightforward process than doing it over the phone.

Just remember to stick to your guns if you’re sure you want to cancel – your provider might try and persuade you to stay by offering a lower interest rate, reduced fees or extra perks, so it’s up to you to remember why you decided to cancel in the first place.

Cancelling your card via a written letter

You can also send a written letter of cancellation to your provider by including your credit card number, account number and a request for your provider to close your account. It can be a good idea to do this as well as one of the above options, to help ensure your request is auctioned as soon as possible.

Cancelling your card online

If this option is available to you (and it should be by the New Year), then you should also be able to cancel your credit card on your provider’s website or mobile app. The steps required will be different depending on the layout of their app or site, but you can expect to select your credit card account and close it.

What about cancelling a joint credit card?

Before cancelling your credit card, you first should consider checking whether it’s a joint account or if you are the primary cardholder. If you are the primary cardholder then you’re solely responsible for all debt on the card, and can cancel the card on your own.

If it’s a joint account, typically both cardholders need to agree to a closure, then inform the lender that they wish to cancel the card cancel. Both cardholdres would need to confirm their identity 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.

Related article: Are Joint Credit Cards Better? 

Why might you want to cancel your credit card?

There many reasons why you might consider closing a credit card. For example:

  • You could be in too much debt or paying too much interest
  • You might want a lower rate card
  • You might want a different card with a better rewards system
  • You might be paying too much in annual fees 
  • You might want to improve your spending habits

Does cancelling a credit card affect your credit rating?

This depends on a number of factors, but the act of cancelling a card by itself is unlikely to be viewed negatively. In fact, with the rollout of comprehensive credit reporting, positive behaviour, such as closing unnecessary credit facilities and meeting repayment obligations, may have a positive impact on your credit score.

In addition, if you have a credit card with a high limit and are applying for a new loan, the existing limit on your credit card could be viewed by the lender as a liability when your application is being assessed, even if you do not use the credit card and don’t owe anything on it. In this case, closing the credit card account could be beneficial to how you are viewed by lenders.

However, opening and closing credit card accounts on too regular a basis could be viewed negatively, as each credit application is recorded on your credit report. Your credit application history is typically one of the main factors used when calculating your credit score.

 

Whatever the reason for cancelling, it’s important that you think about it properly first. There are valid possible reasons for and against having a credit card, and 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 consumers.

If you want to shop around to search for a credit card that better suits your needs, you can compare credit cards with Canstar.

Compare Credit Cards with Cansrar

Compare Balance Transfers too

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