How to close a credit card: 6 simple steps

Cancelling a credit card isn’t as easy as cutting it up and throwing it in the bin. While doing this 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. You could also leave yourself open to the possibility of undetected fraud, if thieves use details from a card that you no longer think is active. 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.

It’s also worth checking your lender’s 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.

How to cancel a credit card in Australia

Before you contact your lender, there are a few things you need to do first. MoneySmart advises that you should pay off or transfer any outstanding debts 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. When cancelling your credit card, you’ll usually have a few different options. If you decide to cancel online, this can be done via your lender’s website or mobile app. The layout of their site or app may differ, but you can expect to be able to select your credit card account and close 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.

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.

Why might you want to cancel your credit card?

There are many reasons why you might consider closing a credit card:

• 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.

Does cancelling a credit card hurt your credit score?

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

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 as a liability by the lender, so in a circumstance such as this, closing the credit card account could be beneficial.

However, opening and closing credit card accounts on a regular basis could be viewed negatively, as lenders may assume that you aren’t a reliable borrower. Each credit application is also 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. You can check your credit score for free with Canstar or via the Canstar app.

Whatever the reason for cancelling, 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.

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