When you pay for an item or service with a credit card, it seems instantaneous. You walk away with your purchase and the merchant is paid. The actual process is a little slower, with many credit card companies issuing a temporary authorization on your account. If the charge ends up going through, you're responsible for paying it, whether you cancel your card or not.
Understanding a Pending Charge
When a merchant swipes your credit card or you use your card to buy something online, the card company authorizes the transaction, usually for the amount of your purchase. In some cases, the authorized amount is less than your purchase, such as when you pay for a restaurant meal with your card and then add a tip to the charged amount. In some cases, it can be more. For example, if you pay for gas or a hotel with your card, the company might charge you more than you end up paying, since it can't accurately guess the final charge during the authorization process. When the charge does post to your account, it is for the actual amount of your purchase.
Paying Off the Balance
As long as the pending charges end up posting to your account, you are responsible for paying them, even if you've since canceled the credit card. If you have a card that has charges pending, wait until those charges have posted before doing anything, so that you know how much you owe. While you might want to wait to cancel your card until after you've completely paid it in full, in some cases, you can cancel a card that still has a balance. To avoid a black mark on your credit report, continue to pay down the debt on the card until it's paid off. Keep in mind that canceling a card before you've paid it off can mean a higher interest rate and fees.
Canceling the Card
Contact your credit card company and tell it that you want to cancel the card. The company might let you do it online, but in many cases, you'll have to call. Send a follow-up letter a few days later to confirm that the card is canceled. Check your credit report a few weeks after you contact the company to see if the card shows as canceled or closed.
If a company, such as your cell phone provider or insurance company, regularly charges your credit card, you'll need to give it a new card number before you cancel. The credit card company has to continue to accept preauthorized payments, even after you've canceled the card, according to the U.S. Office of the Comptroller of the Currency. That means you can still be on the hook for payments, even when the card is closed, unless you notify the credit card company in writing that you've ended the agreement.
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