Close a credit card that still has a balanceOn December 14, 2019 by admin
There is good news and bad news for anyone looking to top up a credit card. First the good news. You can close a credit card even if it is still in balance. Your credit card issuer won’t need you to pay off your balance before closing the card.
In some cases, closing the credit card could be beneficial. For example, if your credit card issuer raises your interest rate, you could close your credit card to opt out of the higher interest rate. The 45-day notification gives you time to balance or pay off another credit card instead of closing the card while it is still in balance.
How Your Credit Score Will Be Affected?
Now for the bad news. Rarely closing a credit card will ever help your credit regardless of whether the account has a positive or negative history. After you close your credit card, it goes to the credit bureaus to report as usual. The only difference is that your card has a “closed” status. Your monthly payment history is still updated every month as you make – or not make – your payments.
A credit card with a closing balance could hurt your credit score.
When your credit score is calculated, it keeps the amount of your credit card ratio in relation to your credit limit. This ratio is known as your credit usage and it is one of the most important factors that affect your credit score. A closed credit card doesn’t have a credit limit, so the credit scoring calculation can punish you with a card with a balance for with and without a credit limit.
What happens after the credit card is closed
Once you have closed your credit card, you will not be able to make purchases on your credit card and you will probably not lose any credit card rewards you have collected. Don’t forget about your credit card payment after you close your credit card. You are still required to make your minimum monthly payment when due.
If you are late on a payment, then face the same consequences: late fees, reminders on your credit report, and a penalty rate hike.
Don’t close your credit card don’t relieve you of monthly interest. Your account balance will still be charged interest each month until your credit card balance is fully paid off. If you only make the minimum payment on your credit card, it will take longer to pay off the credit card and you will pay more interest than if you doubled on payments and paid the balance faster.
Wait for the card to pay off
You shouldn’t let the fear of a possible loss of credit score points make you keep a credit card open. Here’s why. You may have to close the credit card, for example, if you cannot curb your credit card spending and you fall into debt.
A temporary drop in your credit score is preferable to knee deep in debt you can’t afford. Losing Points In addition, the closing of a credit card with a balance can be gained over time as you pay off your balance. Consider your overall long-term financial health as you decide to close a credit card that has a balance.
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