The Right Way to Close a Credit Card Account

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Here's a question I recently got from a viewer. It's a common one...see if you can relate.

I watch your news stories regularly on KY3 news in Springfield, MO.

I believe you had a feature on improving your credit score that dealt with whether or not to cancel credit cards that are no longer being used.  I received my credit report the other day and didn’t realize how many credit cards are still active in my name yet I haven’t used them in years, nor do I carry those cards.
More specifically, I have 8 active (some with zero balance) and 10 inactive credit cards that remain open.
Should I cancel all the inactive credit cards or leave some open to show that I have access to that credit that has not been tapped into.

Thanks for your response.

Good question, Dianna! And you’re right: closing too many available lines of credit can lower your credit score, since part of your  score is the ratio of credit you’re using versus your available credit. In other words, if you’re using 100% of your available credit, to a potential lender you might look tapped out. But if you have a bunch of credit available and are only using a little, to them you’re more desirable.

That being said, 18 individual credit cards is definitely overkill. Since you’re not using all available credit from your eight active cards (which, btw, seems like a lot to me; but that’s another story) there’s no reason to keep accounts open that you no longer use.  And this brings up another tip: when you decide you no longer want to use a credit card, cutting it up doesn’t close your account. You have to write a letter to the bank and formally close your account: Otherwise it will continue to show up in your credit history.

Here’s a sample letter you can use to close inactive accounts: I found this one at this website after a quick Google search.

Your Name
Home Address
Phone Number
Attention: {Creditor’s Name}
Creditor’s Address
RE: Account #: {your account number here}

Dear Accounting Department {or Creditor’s Name if you have it}

Please close the above referenced account effective immediately. My records indicate the account is inactive and has a zero balance.

Please send me written confirmation that this account has a zero balance and the date the account was closed. In addition, please include proof that you’ve complied with section 623(a)(4) of the Fair Credit Reporting Act by reporting this account as “closed by consumer” to the national credit bureaus.

Thank you for your cooperation. If you have any questions concerning this matter I can be reached at (insert daytime phone number and area code)

Signature just above printed name
Your Printed Name

Want other ideas to manage and improve your credit score? Check out Three Tips to Improve Your Credit Score. Just one of many riveting stories in the Debt Section of Money Talks News!

And if you’ve got a question for me, fire away! A couple of things to know first, however. Number one, I may not be able to answer your question. Don’t hate me: we get tons and tons of questions and while I’d love to answer them all, I simply don’t have time. Next, to get an answer you must be a Money Talks newsletter subscriber. Click here to join our free email list.  Finally, your question must be of general interest and not so specific to your situation that nobody else will be able to benefit from the answer.

Stacy Johnson

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