Canceling a Credit Card? Do This First to Avoid Fees

There may come a time when you decide to cancel one of your credit cards if it no longer meets your needs. The good news is that canceling a credit card account is a straightforward process. But before you rush to cancel a card, there's one important step you'll want to take. Doing this could save you money on missed or late payment fees and can make your life easier.

Update your payment methods before canceling your card

Before canceling a credit card, you should check to see what regular expenses are paid with that account. You may have one of your streaming subscriptions or another bill, like a utility service, set to be paid using this payment method.

You may encounter issues if you cancel your card without updating the payment settings for these bills. First, the charge will be declined if the card is no longer active. The biller may also charge you a late or missed payment fee when your payment method doesn't go through.

Every extra fee you pay impacts your personal finances, so it's best to avoid them if you can. If you don't catch the missed payment quickly, some billers might also report your account as unpaid to the credit bureaus, which could result in a negative mark on your credit report.

That's why you should take some time to update your payment methods for any expenses paid with this credit card. Doing this before you cancel can eliminate fees and missed payments and ensure your services and accounts stay active without disruption.

Here's how to cancel a credit card

Are you ready to cancel a credit card you no longer need? Here are the steps to take.

1. Update your payment method for your bills

As explained above, updating the payment method for any bills paid with this card is essential. After you do this, you'll feel confident that your bills will continue to be paid in full and on time.

You can review your recent credit card statements to verify which accounts are paid using that card. Remember to verify whether the payment method needs updating if you have yearly subscriptions or memberships that are charged less frequently than every month.

2. Pay your remaining balance

The best strategy is to pay off the remaining balance for the card you intend to cancel. This will ensure your account is paid in full, so you don't owe the credit card issuer money or receive a negative mark on your credit report because of an unpaid balance.

If your current account balance is too expensive to pay off, consider transferring the debt to another card before you cancel your account. An excellent strategy is to use one of the best balance transfer credit cards, which provide a 0% APR offer on balance transfers for a set time.

You'll avoid interest charges if you pay the debt off before the promotional period ends. You'll pay a balance transfer fee (often 3%-5% of the balance you're moving), but it can be worth it to save money on interest. Review our list of the best balance transfer credit cards to learn more.

3. Use your credit card rewards

When you cancel your credit card account, you'll likely forfeit unused rewards. It's best to use your rewards before canceling your card. If you have another rewards credit card from the same bank, check to see if you can transfer your earned rewards to that account.

4. Cancel your credit card

You can cancel your credit card by calling the number on the back of your card. Alternatively, some credit card issuers allow you to do this within your online account. If you later notice that the card is still listed as active on your credit report, you can report the error to the credit bureau that issued the report and contact the credit card issuer to follow up.

5. Check your credit report

Finally, review your credit report to verify your account was successfully canceled. It may take a few weeks for your report to reflect this change, but it's wise to double-check.

Canceling a credit card account is that simple. Are you looking for a new credit card to better suit your spending? Check out our list of the best credit cards for inspiration.