How do I cancel a TD Bank credit card?

It is better to keep unused credit cards open than to cancel them because even unused credit cards with a $0 balance will still report positive information to the credit bureaus each month. It is especially worthwhile to keep an unused credit card open when the account does not have an annual fee.... read full answer

Still, there are times when it may be beneficial to close your credit cards, such as to avoid expensive annual fees. And if you’re worried about your credit score, you can use WalletHub’s free credit score simulator to see the potential impact closing a credit card will have

Why It Is Better to Keep Unused Credit Cards

Just keeping unused credit cards open helps your credit by maintaining the total amount of credit you have available and preserving the length of your credit history. If you don’t use a credit card, your account will still get reported to the credit bureaus as being in good standing every month, assuming you have a $0 balance. This will continue to add positive information to your credit reports, helping your credit score.

On the other hand, when you close a credit card, especially if it’s one of your oldest credit accounts or one that has a high credit limit, your credit score will likely suffer a bit.

When It Is Better to Cancel Credit Cards

Despite the potential for credit score damage, it’s important to remember that there are a few situations when it might be better to close unused credit cards rather than leave them open. If your unused credit card charges an annual fee, for example, and you don’t need your credit score in its best shape for a while, it’s probably best to save the annual fee and close the account.

On the other hand, if you want to cancel your credit card because you are concerned about overspending, try locking it away in a safe place first. If that doesn’t work, it will likely work out better for you and your financial future to close the credit card account, even if your credit score takes a hit.

Closing a credit card with zero balance is not a good idea if that card has no annual fee. Any credit card you manage responsibly, even an unused one, reflects positively on your credit history. So closing such a card will have a negative impact on your credit standing. But it can be worth it if your card is costly or if you’re worried about falling victim to fraud while you’re not keeping a close eye on it.... read full answer

Here are the arguments against closing a credit card with zero balance:

1. Average account age suffers. This makes up at least 15% of your overall credit rating, so shortening it can hurt. Here’s a quick example: Imagine you have three credit card accounts, which have been open for 3 years, 5 years and 10 years, respectively. The average account age is 6 years. If you close the 10-year-old account, the age of your average account falls to 4 years. Older accounts are better for your score because a long track record of responsibility tells issuers you’re likely to behave the same way in the future.
2. Utilization increases. “Utilization,” or how much of your credit line you use, is important to your score. Creditors care about both your utilization on individual cards and your total utilization. Generally, the lower each is, the better. And closing an account with zero balance will increase your total utilization.Let’s say you have three credit cards, each with a $1,000 credit line. You use 0% of one and 25% of the other two. Overall, that’s 16.7% utilization. But if you cancel the unused card, it jumps to 25%. That’s troublesome because credit score damage typically worsens if your utilization rises above 30%, and you’d be close to that milestone.

So closing an account will be a blow to your credit. You can improve your score afterward by paying on time with your remaining account(s). But it’s usually best to just keep accounts open and avoid the damage entirely. There are a few exceptions, though.

Here’s when to close a credit card with zero balance:

• It has an expensive annual fee.
• You’re worried about fraud and won’t be monitoring the card as closely. All credit cards give you a $0 fraud liability guarantee, but you might not want to count on the issuer to flag every fraudulent charge on its own.
• Keeping it open becomes a hassle, for one reason or another.

By the way, in case you’re wondering, it is possible to close a credit card that has a balance. But you’ll still be responsible for paying and will continue to accrue interest until the balance is fully paid off, even after the account is closed. You just won’t be able to make any new purchases.

If you’d like to monitor how your credit changes after you’ve closed an account, you can track your credit report and score for free on WalletHub, the only site where reports and scores update daily.

Closing a credit card with a balance is possible, and it can be beneficial when a credit card company changes your account’s terms for the worse, such as raising the annual fee or APR. It can also be a good idea to remove the credit card itself from the situation if you want to pay off the existing balance without the temptation to spend more. Closing a credit card doesn’t cancel the balance owed, nor does it make the entire balance due immediately. You will have to continue making at least the minimum payment due each billing period until the balance is paid off. But closing the account will prevent you from making new purchases.... read full answer

There are a lot of factors to weigh out when deciding whether or not closing a credit card account is the best idea, so it’s wise not to do it in haste. Before you take action, consider what happens if you cancel a credit card with a balance.

Here’s what happens when you close a credit card with a balance:

1. You will still owe your balance. You won’t be forced to pay the balance on the closed account right away, but you must continue making at least the minimum payment due each billing period. Interest will still accrue, and the minimum amount due will steadily increase. Every card issuer will have different rules for this situation, and you may find information about it in your card’s terms. If not, you should call customer service to find out as much as you can from your card issuer before agreeing to close the account. If you’re thinking about closing the card so you can finally pay it off, consider a balance transfer, a payment plan with your card issuer, or a credit card consolidation loan.
2. Any rewards you have earned will likely be lost. Make sure to use any remaining rewards on your existing card, as they’re likely to be forfeited when you close the account. Plus, it can’t hurt to pay down a bit of your balance by redeeming for cash back.
3. It will affect your credit score. If the credit card is one of your oldest credit accounts, your average credit age will shorten. Your credit utilization could also go up if you have balances on other credit cards, too. Both of these will have a negative effect on your credit score. If you plan on applying for a loan or financing a big purchase anytime soon, check your credit score first to make sure you can afford to take a hit.

All in all, closing a card with a balance is rarely the best option. There are alternatives, but not all of them are available to people of every credit level – such as a good deal on a balance transfer credit card. If you’re willing to endure a potential hit to your credit score in exchange for the long-term health of your finances, closing an account with a balance can be a way to get yourself on track. Just make sure you understand the repayment terms before you act. Closing a credit card with a balance does not get you out of paying that balance.