Strategies for Closing a Troublesome Credit Card

Many consumers face challenges when trying to close a credit card account, especially with larger banks like Citibank. This article delves into the complexities of closing a card, clarifies common misunderstandings, and provides actionable advice for individuals who have encountered similar issues.

Understanding Citibank's Policies

One consumer recently reached out to inquire about closing their Citibank credit card, which the bank would not issue a new one for despite having a consistently on-time payment history. The consumer took the steps to pay off their balance and requested account closure. Notably, Citibank refused, explaining that no new card issuance meant it was unnecessary for them to close the account.

Consumer: 'Citibank sent me a notice that they would not issue me a new credit card when it expired even though my accounts are always on time. So I paid off my balance and requested that they close my account. At least that way they can report to the credit bureau that I requested it closed. They refused saying that it was unnecessary since they were not issuing a new card. What do they gain from this?'

Clarifying Misunderstandings

The response suggests some confusion or misunderstanding about typical bank policies regarding account closure. Many consumers are under the impression that any credit card account can be closed simply by paying off the balance and making a request, regardless of whether a new card is being issued.

Expert Clarification: You don’t offer this info. You are trying to close your Citibank credit card but they are refusing. Boy I’d like to know why. You don’t offer this info.

It is true that you can generally close a card with a balance, but it comes with certain conditions. The account would be labeled 'closed with balance,' which means that no new charges can be made, but the remaining balance still needs to be paid in full. Historically, closing accounts with balances hasn’t typically posed issues, but this can vary depending on the bank's policies and the consumer's standing with them.

Consumer: 'I’ve always been able to close any credit card account with or without a balance. Closing it with a balance just means you can’t charge to the card any longer because it is closed but that you must still pay on it until the debt is satisfied.' This was my experience a few years ago. Perhaps things have changed. If so, just don’t use the card at all and pay it off. Once paid off, you should have absolutely no problem whatsoever closing the account. Citibank cannot make you keep an account with them when you owe them nothing.

Alternative Approaches and Considerations

While paying off the balance and requesting closure is a common and straightforward approach, there are other strategies to consider, especially regarding potential impacts on your credit score.

Strategy 1: Pay Off the Card with a High Balance - If your Citibank card has a high credit limit and a significant balance, closing it might temporarily impact your credit utilization ratio. However, if you have other cards with high balances, closing this one could help improve your overall financial health.

Strategy 2: Leaving the Card Active but Unused - While keeping a card with no recent activity can lower overall credit utilization, it might slow down the process of reducing your total credit line. If you have other cards with balances, Citibank might not object to your request to close the account.

Strategy 3: Consulting Your Credit Report - It is advisable to review your credit report to understand the potential impacts of closing a card. This will give you a clearer picture of how the move will affect your credit score and financial situation.

Despite your reluctance to keep a card with no activity, remember that maintaining a variety of credit types and having a mix of credit usage can positively impact your credit score. If you have no other cards and want to maintain a diverse credit profile, you may want to keep the Citibank card for now.

Consumer: 'I have four cards I use each but pay three of them off every month. I have a large credit line with each so I am reluctant to give them up. However, I could get rid of at least one and I doubt it would affect my credit score at all. If you have other cards with balances more than 50 of your credit line and you pay the Citibank card off you might just want to hang onto it for a while to help get your credit score up or to maintain it. You don’t have to use it at all. You can always cancel it later when you have paid your other cards down substantially.'

Conclusion

Closing a troublesome credit card can be challenging, especially with larger banks like Citibank. Understanding the policies and alternative strategies can help you make an informed decision. Always consider the potential impacts on your credit score and financial health before taking any action.