Q: What is the best way to close a credit card account? We want to pay off this credit card in full.

What procedure would you use, so the credit card company cannot say we still have a balance? We want to close the account, but we don’t want to have the account reported as closed with a remaining balance.

A: Paying off a credit card can be a little tricky. Often, a consumer will call their credit card company and ask for a payoff balance, only to find the next month that there is a remaining finance charge.

Here’s how to do it so this doesn’t happen to you. Once you get your next statement, call the credit card company and verify that if you pay the balance on the statement you will be able to pay off the balance in full. Then, write a check to pay off the card.

Then, wait for confirmation that your check has cleared. If you use your credit card company’s free online bill payment service, you would receive this confirmation almost instantly since the money is automatically debited out of your checking account.

Place another call to the credit card company to make sure there are no remaining finance charges on the credit card. Once you get the “all clear,” you can send a letter closing the credit card account. It’s always best to close an account by writing a letter to the credit card company, although you may want to follow up with a phone call to be sure the account has been closed.

However, if you are able to bring the balance to zero on the card, and there is no annual fee to keep the account, you may wish to keep the account open.

Why? One of the things that credit reporting bureaus look at is the length of time you have had various credit accounts open. The longer you have a credit account open, the higher your credit score (provided you’re making at least your minimum payments on time). So, it might help your credit score to continue to keep an account open, even though you no longer carry a balance on the card.

One of the greatest misconceptions about credit scoring is the idea that it’s good for your score to carry a balance. If you want to give your credit history a boost, you should pay off your cards, and then keep the credit card account open but without a balance.

For more information, check out one of my favorite credit scoring sites, myFICO.com.

Published: Nov 5, 2004