To begin with, you should not close a credit card that still has a balance on it, close your only credit card, close your oldest credit card account or your only card that has an available balance.  Closing these kinds of cards can affect your credit score in a negative way.

If your account is paid off and it is a card that you are determined to get rid of, you will need to do 2 things.

Call Customer Service

You will find the number to customer service on the back of the credit card or on a recent bill.  Call the number, noting the time and date, and let the customer service representative know that you are closing your account.  They may try to persuade you not to close the account, but stand firm.

Submit Your Cancellation Request in Writing

It is necessary for you to follow up the phone request with a written request to cancel the account.  Always keep a copy of the letter for your own records.  Here is a sample letter for you to use.  Just replace the sections in red with your own personal or recent information.

Sample Credit Card Cancellation Letter

Date

Credit Card Company Name
Company’s Address
City, State and ZIP Code

Re: Closing account on card name account number

Dear Sir or Madam:

This letter is my official notice that I am canceling my credit card account with your company; list the name of the card company, effective immediately.  Please close the following account in my name:

Name on Card: _____________________

Account Number: __________________________

The balance was paid on Date with Check Number or Reference Number from your bank account statement for the withdrawal.  That brings my account balance to zero and all fiscal responsibilities with this credit card account to a close.

Please send me written confirmation that my account has been closed. Also, please confirm that you have notified all appropriate credit card bureaus that this account was “closed by request of cardholder.”

If there are any discrepancies between my records and yours, please contact me by mail at the address below or by phone at telephone number.

Thank you for your prompt attention to this matter.

Sincerely,

Your Signature
Your Typed Name
Address
City, State and ZIP Code

Even if you prefer to write your own version of a letter to the credit card company, be sure that it has all of the required information in it.  It will need to have your name, address, credit card number (even if you only list the last four digits of the card number), your request to cancel the account, a reference of your verbal request and listing the date you made the call, request for written confirmation of the cancellation and that you want your credit record to reflect that the account was closed by your request.  Oh, and don’t forget to keep a copy for your own records!

One of the changes that have taken place is how transactions that put your account over the credit limit will be handled. In the past, transactions approved that put your account over the credit limit would be subject to an over-the-limit fee which only served to increase the balance on an account that was already past the allowable amount. Many card holders found themselves incurring charges that they thought were within their allowable amount, only to be surprised when the monthly statement arrived showing the additional fees.

To prevent this from happening, new regulations are now in place that require the credit card company to get prior consent from account holders before honoring any charges that will put the account over the limit. While the process may vary between companies, the steps generally required to request over the credit limit coverage are as follows:

• The credit card company is required to disclose information explaining your options regarding opting in or out of over the credit limit coverage.

• The account holder must request this coverage to avoid having transactions that would put their account over the credit limit declined.

• Consumers who opt for the over the credit limit coverage must be made aware of any fees that they will incur prior to the coverage taking place. Account holders must agree to these fees, which average $30.

• Once you have requested and agreed to the over the credit limit coverage, understand that certain transactions may still be declined based on the policy set forth by the credit card company.

For the purpose of managing your personal finances, your goal should be reduce your credit utilization which would make this option a moot point. If you must opt for the over the credit limit coverage, understand that carrying a high balance (close to your limit) is not only detrimental to your overall financial health but also likely to result in additional fees and penalties when you go over your limit. A better option would be to work on reducing your debt and increasing your savings. By doing this you can rely on your savings in the event of an emergency versus going over the credit limit on your credit card accounts.

First of all, the site  outlines the type pf person that might be successful at negotiating their interest rate lower:

1. You’ve been a good customer and have at least 6 months of on-time payments.
2. You’re going through a hardship and may not be able to make your payments.
3. You have an offer for a card at a lower rate, but don’t want to pay balance transfer fees.

If you fit one of these, you’ll probably be successful at getting the credit card company to lower you rate.

How to Use NegotiateMyRate.com

First, find the bank that holds your credit card and type your current balance into the box. As you enter your figure the potential savings box automatically fills with the amount you can potentially save.  This is not to say it is a done deal. If you have poorly managed your account, for example missed payments regularly, then you may not be offered as much, but these handy calculators certainly clear up that doubt that you will not actually be saving that much surely.

For example, currently the top bank is Bank of America, who potentially can lower their rate by 11.1%. Below this other banks file in, sitting position wise of highest to lowest rate reductions.

A balance of $4000 could at 11.1% (if you are a Bank of America customer) lead to savings of $2460. Now that is not to be sneezed at, and even with American Express where the best rate reduction is 2.5% you are still looking at $554.

How NegotiateMyRate.com Can Help You

Once you have read all their useful guides, such as remaining calm and polite when dealing with staff (and remember that this is not a right, so you may not get it), and you have used the calculator to find your saving, click the negotiate button. The only downfall of this next page is that you will have to reenter the amount you owe.

The page has three categories of information: what to say, what to know and what to ask.

On the What to say tab, it gives you scripts to use so you can have a little confidence when you speak the bank rep. After you make the call and ask for a lower rate, you can leave your experience on the site.

Reading comments left by others will also give you a good idea on how successful you will be.

Basically it has a whole cheat sheet, so you can simply call the credit card company with your laptop in front of you and hopefully be successful. Helpfully each bank has a success rating too, so you have some idea before you begin how likely you are to achieve anything.

Be sure to check out: How to Negotiate With Credit Card Companies

Other Credit Card Criteria

The credit card companies can look at additional factors before they decide to issue you a credit card.  You will want to take a look at the way you handle some of these things in order to show that you are a responsible person and able to repay the monies owed.

1. A Bank Account – You should already have a bank account, as it is fairly easy to open one and you only usually need a driver’s license or state issued ID.  In this case, it’s your account history that will be looked at:  have you had any overdrafts or periods with a negative balance?  How long have you had the account? Do you have any money in savings?  That sort of thing.
2. Your Employment History – Hopefully you have been working for a fair amount of time and have not had any significant periods of unemployment.  If you can hold a steady job, it just may be very helpful in getting you approved.
3. Your Residence – If you can show that you have a stable residence as well, it can certainly look good for you as a credit risk.  The lenders will look to see if you are renting or if you own your home.  Again, this is an indication of your overall reliability.
4. Other Bills – Bills, such as those for your utilities, will also be helpful in showing a credit company that you are responsible.  When you have the gas bill, telephone, water or cable etc. in your name, this can help when you are trying to get a credit card for the first time.

Where to Start Looking For a Credit Card?

One of the best ways to get started is by opening an account and maintaining a good relationship with your bank.  As mentioned above, any lender is going to want to know – first and foremost – if you are a good credit risk or not.  If you can show that you know how to handle your money and have kept your checking account in good standing the entire time, then you may be ready to ask for a credit card.

Many banks have their own credit card departments and are able to issue you a card in house.  Banks want to be your “one-stop-shop” for everything financial, so it is in their best interest to help you AND get your business at the same time.

Another great place to look when you are trying to establish your credit history is at department store cards.  First, be sure that the department store card is reported to the credit bureau and is not just handled by the store.  You need the card to be a real credit card that is going to help you get the credit history you are looking for.

Look at all of the information for the card, such as a yearly fee, how and where you can make payments and what the interest rate is.  Know what you are getting into and be sure it is something you can handle. If you get approved for a department store card, carefully make a purchase and then pay off the balance.

As soon as any credit card is active, it should start being reported to the credit bureaus.  Now you just need to be thoughtful in establishing your credit history by making purchases and then paying your balance in full.  It will take some time, so be patient!

 Building Credit

New home owners trying to get loans require some form of credit score to show a bank. The only way to build credit is to pay the bills on time. Banks want to see a history of bill paying before lending money to people who want to purchase a big ticket item like a house, condo or vehicle. One of the easiest ways to build credit is by consistently paying off the credit card bills. It is not the only way. Paying bills from businesses and utility companies are ways to enrich a credit score. Also a history of paying rent, lease or tuitions will provide the necessary information to land a good credit score. Not paying bills is the best way to destroy a credit score. If you are using a credit card to build a credit score, spend within your means and pay off the entire amount, if possible, every month. This way you will avoid substantial interest charges and late fees.

Shopping Online

Credit cards are not the only way to pay for online merchandise or rent a car. PayPal accounts and debit cards are taken most places that a credit card would be. By using a debit card you avoid the pitfalls of over spending what you don’t have. PayPal accounts can link directly to your bank account to allow withdrawals immediately. Need to rent a car? A credit card is not necessary. Use a debit card, that way overspending will not happen.

Emergencies

Having a card for emergencies gives travelers a sense of confidence and calm. A credit card helps but a debit card can also be used. While traveling, a debit card will give access to any situation that arises. Emergency funds should include living expenses for around three months. A buffer of around $1,000 to satisfy emergency situations can be garnered without the use of a credit card. Credit cards dangle rewards, points, saving money and gift promotions. These are all marketing schemes to promote the use, and often overuse, of credit cards to make the card companies more money. In store cards often give discounts, but they make more on the interest charges if you don’t pay it off every month. Credit cards are a convenient way to satisfy the need to have cash at the ready but they are not a necessity.

While it is true that closing credit card accounts may have a negative impact on your credit score, there are other reasons why closing an account is the best choice.

• Idle and unused cards are often involved in credit card fraud or identity theft.
• Other accounts are simply no longer the best choice for your credit needs.

Regardless of your reason for closing your credit card account, the following steps will help you avoid problems that may arise as a result of this action.

• Pay off the balance- As long as there is a balance on the account you must continue to deal with the credit card company. Closing the account will not make the balance disappear and as long as you are still responsible for paying off the balance there is no point in closing the account. Closing an account with a balance with hurt your credit score more than keeping it open with a balance.

• Confirm zero balance- Once you have sent your final payment on the account, wait a few days to ensure the credit has been applied. Before closing the account you will want confirmation that there is no balance remaining on the account.

• Make the request- Credit card companies do not automatically close accounts that have a zero balance. Contact the credit card issuer by phone and ask to speak to a representative who can help you close your account. Be prepared for a sales pitch which may include offers and incentives to retain your business. You may want to listen to these offers, especially if you have other credit card accounts that lack the same perks. If you are not interested in keeping the account open, politely tell the customer service representative as much and move on. You may want to take this opportunity to confirm no further action is required on your end toclose the account.

• Document your request- It’s always best to cover all your bases; in this situation it is recommended you follow up your phone call with a written notification. A short letter to notify the issuer of the card that you have requested your account be closed should suffice. Include your name, account number and telephone number. Invest a few dollars to send this letter via certified mail with confirmation of receipt.

• Check credit report- To ensure your account has been closed per your request, order a copy of your credit report after one month. This should be ample time for the information to be updated and recorded. There should be a note that states the account has been closed at customer’s request. If this information does not appear or is inaccurate, follow up with the credit card company to correct the information.

Consumers are becoming more educated in the proper handling of their personal finances. When you increase your knowledge, you increase the likelihood of making sound financial decisions which will in turn improve your overall financial health.

Believe it or not being able to show lenders that you are a responsible spender is a good thing.  Paying off reasonable debts on time and as scheduled, helps you to build credit.  Lenders want to lend to people with good payment histories. Debts that are healthy build a strong credit history and raise credit scores it is when the debts become unmanageable that they can become a danger to your financial future.  

Unhealthy Debt

Debt starts becoming unhealthy when you can no longer afford your payments.  It does not take long for bills to pile up and become unmanageable. Typical billing cycles have a 30 day turnaround.  Missing the payment makes the next one come quicker and the amount you owe higher. 

If you find yourself failing to pay one bill so you can afford to pay another, falling behind on due dates or no able to stay on time or ahead of the payment arrangement debt may be getting ahead of you.  Not making payments as scheduled results in charges and fees.  It is often the influx of charges; fees and a pile of bills that can no longer be comfortably paid that are signs of what is soon to become unhealthy debt. 

Those that have learned to deal with a life of debt may not realize how far in debt they are until something tragic happens.  When you begin to see even the smallest sign of unhealthy debt creeping up on you; act quickly.  Responding to debt is always better than reacting to debt. 

Signs You Should Get Help

• When you have incurred multiple charges and fees because of unpaid bills.

• Multiple credit cards with high balances.

• Finding that you are more frequently paying bills late.

• Phone calls or letters from collection agencies.

• Job loss or sudden loss of income that prevents you from having the income you once had. 

• Letters from vendors requesting outstanding payments.

• Finding that you avoid paying your bills altogether.

Proactive approaches to get help with debt can save you a great deal of money in the long run.  Protecting the integrity of your credit score is possible if you respond to debt immediately.  Those that are just beginning to see the signs of stress when it comes to paying the bills should seek out some assistance before the debt becomes out of control. 

• When a deposit is required- There are many instances when you may have to place a deposit before renting or using various merchandise. When you use a debit card to place a deposit, you are basically allowing the merchant to hold onto money in your bank account which could result in problems should you need access to that money before the deposit hold is lifted. By using a credit card to make the deposit, you still have access to your cash should you need it.

• Dining out- For years we have heard the following advice, “never allow your card out of your sight”. How often do you follow the wait staff when you present a debit or credit card to pay your restaurant bill? Most people will answer- never. Credit card theft and identity theft are a real problem for consumers, and many instances occur when your card is used at a restaurant. Credit cards offer more protection, mitigating the risk should someone copy your account information. Many restaurants also place an additional hold on your account, for the purpose of tipping. If you leave a cash tip, you might find more of your money is “held” until the transaction is processed.

• Online purchases- Making a purchase without receiving the merchandise immediately puts you at some risk. There could be errors with the order, shipping problems or any number of scenarios which could potentially result in you having paid money out of your bank account for a product you are unable to use. Again, credit cards offer a higher level of protection than debit cards, making them the preferred choice.

• Travel reservations- Unless you are checking into the hotel at the moment, most travel reservations are made in advance. Using a debit card means any holds could take place at the time the reservation is made, making that money unaccessible in the interim. Some travel reservations such as car rentals require a credit card.

• Monthly payments- If you want to set recurring payments up to be paid automatically, consider using a credit card versus debit. If you ever have an issue canceling a membership or halting automatic payments your money is safe in the bank until the problem is resolved.

Remember, credit cards on their own are not necessarily evil. When managed responsibly, you can use your credit card without going deep in debt. The situations noted here are prime examples of the benefits of using credit wisely. It basically comes down to the level of protection offered by credit cards that is currently lacking in debit card use.

• Loopholes- The Credit Card Accountability, Responsibility and Disclosure Act (CARD) was enacted to add protection for consumers in a highly unregulated industry. Unfortunately there are several loopholes in the law that can end up costing you more money. One such loophole is in the provision for advance notification. In this provision, card issuers must give advanced notice, 45 days to be exact, for significant changes in terms. This included fees and finance charges. Credit card companies are not required to give advanced notice on credit limit decreases, rate hikes due to payments that are 60+ days late or the expiration of promotional rates. This means it is up to you the consumer to pay close attention to every detail on your credit card statement to avoid paying more money.

• Over the limit- In order to be charged an over the limit fee you must give permission to allow over the limit transactions. If you do not give your permission to allow over the limit purchases, it does not mean necessarily mean a transaction that would put your account over the limit will be denied. If this situation occurs you would have grounds to deny the over the limit fee. If you opt to allow over the limit transactions on your account, you must be informed of the over the limit fee and are only allowed one over the limit fee per billing cycle.

• Annual Fees- Despite speculation that annual fees will become more prevelant as a way to boost revenues, their reappearance has been on the slow side. With that in mind, understand that your credit card issuer can implement an annual fee at any time as long as they provide advanced notice.

Many of the changes taking place within the credit card industry will help consumer moving forward. If you currently have large balances, you are advised to pay down your debt as quickly as possible to avoid being at the mercy of the credit card companies. In the meantime, managing your credit responsibly and paying close attention to every piece of information provided by your card issuer will help you avoid additional fees and penalties that are still a factor.

1. Do you have a budget set up?
Creating a monthly budget and sticking to it is a great way to track your spending.  Keeping a monthly tally of your expenditures will outline where you spend and where you can trim your spending.

Track your spending including all monthly expenses such as mortgage, electrical bill, insurance, and other incidentals such as morning coffee and other special treats.  Keeping systematic record of expenses and budgeting your income, will prevent overspending and collapse into debt.

2. Do you use credit cards  because you have no cash?
Having a credit card for emergency purposes and major necessities is a great way to get out of a bind but for daily regular expenses try using cash.  Using cash prevents over spending and cuts down on discretionary spending such as dining out, entertainment or other unnecessary expenses.

Using a credit card can cause card balances to be ‘run up’ unnecessarily.  Their convenience is proportional to the card holders overspending.  Avoid over spending, cut up the cards and pay with cash.

3. Do you pay off the card with the highest rate first?
Reduce your monthly payments by paying off the card with the greatest interest rate.  Once it is paid off, close it out and cut up the card.  Continue to do this with the card with the next highest monthly interest until you have only one card with a favorable rate.

Also, pay down cards to 50 percent of the card limit.  Balances higher than 50 percent of the limit will reduce your credit score.

4. Are you considering taking on a second job?
Part time work for short term gain may provide some respite to your debt woes.  Taking on a second job to pay off outstanding bills will provide a sense of control and will increase your income.

Getting out of debt and staying out of debt is as simple as spending less than you make.  Spending less can be done with discipline and control.  Create a budget and stick to it and you will be on track to stay out of debt.