Many businesses market their credit cards to young couples for benefits such as cash back, frequent flier miles and discounts. It's easy to say yes at the cash register to applying for a credit card to get that extra discount. Unfortunately, when you get the card in the mail, you may have a change of heart. Don't throw that inactive credit card into the trash. There are specific steps you need to take to protect your identity and credit rating.
Call to Activate
Many young consumers see a new credit card with a "call to activate" sticker and assume the credit card is inactive. In reality, not all credit card issuers mail inactive credit cards. Some cards are mailed ready to use. They are also already reported on your credit report. When you call in to "activate" the card, your card issuer uses this opportunity to sell you insurance on the card or other products. The only way to tell if the card is actually inactive is to attempt to use it, which you don't want to do if you want to cancel the card.
Your Credit Report
Many credit card issuers begin reporting credit accounts to your credit report immediately. You do not need to activate your credit card for them to begin reporting the account. Before you cancel that credit card, make sure it's not already reporting on your credit report by pulling your three credit reports. Cancelling an active credit card on your credit report can lower your score.
By removing the available credit from that credit line, you lower your total available credit, increasing your total utilization ratio. Your utilization ratio calculates how much money you owe on your credit cards in comparison to their available limits. A high utilization ratio indicates a higher credit risk and lower credit score. You want your utilization to be as low as possible. For an excellent credit score, keep it below 30 percent.
Cancelling Credit Cards
Call the number on the back of the card and tell the representative that you changed your mind and want to cancel the credit card. Confirm that the account balance is currently at zero. Once the representative confirms the company will cancel the card, end the conversation. Be prepared for the representative to attempt to talk you out of canceling the card. Follow up on the conversation with a letter to the company confirming that you canceled the card. Request written confirmation that you canceled the credit card for your own records. Send the letter using certified mail, return receipt requested, so you can verify that someone signed for your letter.
Cut Up Your Cards
Never simply throw out a credit card, active or inactive. Make sure to cut the card up or shred it using a shredding machine to ensure that no one can pull it out and use it again. Simply throwing away an inactive credit card leaves you vulnerable to identity theft and could ruin your credit.
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