Opening a new credit card can be an exciting experience, especially if you're looking to build your credit history or take advantage of exclusive perks. However, there may come a time when you decide to cancel your new credit card. This article will delve into what happens if you cancel a credit card you just opened and provide some insights on the best approach to do so.
When you cancel a credit card, it essentially means that you are closing your account with the card issuer. The process varies from one issuer to another, but generally, you can either call the customer service number or visit the issuer's website to request the cancellation. Some cards may also allow you to cancel online through their mobile app.
Once you initiate the cancellation process, the issuer will typically send you a confirmation letter or email stating that your account is being closed. At this point, you should ensure that all outstanding balances are paid in full before the cancellation date. If you fail to do so, you may face fees or penalties for late payments.
After the cancellation date, the card issuer will close your account and stop any further transactions. It's essential to note that once your account is closed, you won't have access to the card's benefits, rewards programs, or any other services associated with it. Additionally, if you have any pending transactions after the cancellation date, these could be declined by merchants.
Cancelling a credit card can impact your credit score, depending on several factors. Firstly, if you have a short credit history or low credit limits, canceling a card might not significantly affect your score. However, if you have a long history of on-time payments and high credit limits, canceling a card could potentially lower your credit limit and reduce your overall credit utilization ratio, which is a key factor in calculating your credit score.
It's also worth noting that canceling a credit card can result in a temporary drop in your credit score, known as a "hard inquiry." A hard inquiry occurs when a creditor checks your credit report for the purpose of extending credit. When you cancel a card, the issuer typically reports this action to the credit bureaus, which then updates your credit report. This can temporarily lower your score, but it usually recovers within a few months.
If you're considering canceling a credit card, it's crucial to weigh the pros and cons carefully. Here are some factors to consider:
- Fees and Penalties: Ensure that you understand any cancellation fees or penalties associated with your card. Some issuers may charge fees for early closure or if you have outstanding balances.
- Credit Score Impact: As mentioned earlier, canceling a card can temporarily lower your credit score due to a hard inquiry. However, if you have a good credit history and pay your bills on time, the impact should be minimal.
- Rewards Programs: If you're heavily reliant on the rewards offered by your card, canceling it may not be the best option. You should evaluate whether the benefits outweigh the potential negative impact on your credit score.
- Emergency Fund: If you're planning to cancel a card because of financial difficulties, it's essential to have an emergency fund to cover any unexpected expenses until you establish a new financial plan.
In conclusion, canceling a credit card you just opened can have various consequences, including impacts on your credit score and loss of rewards programs. Before making a decision, it's crucial to assess your financial situation and consider the potential benefits and drawbacks of canceling the card. If you're confident about your ability to manage without the card and its associated benefits, proceeding with cancellation may be the right choice for you. However, if you're unsure, consult with a financial advisor or credit counselor to make an informed decision.