Getting credit card revenge without damaging your score

One of my friends emailed me last night with this question about how to best punish a bad credit card company:

Is it bad for your credit score to close a credit card? I only have 2 cards total...and I want to cancel one of them. 

Here's why I want to close the card: the customer service guy ENRAGED me.  A few days ago I was thinking "wow, I don't think I've received a statement in a couple of months."  I called and found out that the idiot creditor that changed my address put down "Main" Street and not "Marin" Street when I moved a few months ago.  It's definitely their fault, I obviously never said I lived on Main Street. 

Despite all this, I was only one week late with my payment. The credit card company won't waive the $39 late charge and the finance charges.  I have never had finance charges in my life!!!  Can you believe that?  And the rep wasn't even apologetic and wouldn't even waive the fee to let me pay over the phone!

I have been a valued cardmember, whatever that means, for 8 years and always paid on time.  This is how they treat me?  So, I want to close the account. What do you think?

This is a pretty common question I'm asked. People want to exercise their consumer rights when they are mad with a company. Closing your account seems like a logical way to punish your creditors, but it could end up hurting you a lot more than it hurts them.

It is very bad for your credit to close a card. It is especially bad to close one of the oldest credit cards or one of only a few credit cards on your report. Closure can shorten your credit history, throw off your balance of accounts and reduce your amount of available credit. All three changes result in damage to your credit score.

Unless the credit card has an expensive annual fee, just cut the card up and leave the account open. The unused balance is good for improving your revolving debt utilization and credit score. Be sure to check the account once in a while even after you've closed it just in case. You wouldn't want a forgotten fee or fraudulent purchase to damage your credit while you're not looking.

As for the late fees, don't give up on having them removed. Call again and ask to speak to a manager or the retention department. Tell them that you've been a good customer and that if they don't resolve the issue you will close your account immediately. If they still ignore the issue, then you should just cut up the card without closing the account.

Comments

[Justin]

I'm not mad at my bank--but I'd like to get a credit card through my own bank (I got my first real credit card through a company who "caters" to college students). I'd like to move to a credit card where I can pay it off online from my bank account (without extra fees for paying online). Part of my education involves interning 6 months out of the year, so I feel that having a credit card is neccessary--I dont live with my parents, and every once in a while I run into a cash flow issue after a school term before my first paycheck from working comes in.

Whats my best course of action?

Apply for the credit card through my bank that better matches my expectations and cancel my current credit card? Or just chop it up and not use it? They just raised my credit limit--should this have any effect on what I do?

Right now I'm not planning on taking out additional loans (for education, cars, houses, expensive things) so a drop in my credit score for the next few years shouldn't hurt me all too much.

[EmilyPeters]

I recommend that you leave your old account open and focus on getting a new credit card that meets your needs. Most major credit card issuers do not charge you extra to pay your bill online. You can compare credit card offers online here - http://www.credit.com/products/credit_cards/

[Emma]

I'm not sure that I agree, based on the fact that leaving open accounts makes you more susceptible to identity theft.

[EmilyPeters]

That's a good point Emma. Having too many unmonitored accounts can leave you more vulnerable to identity theft. But in this case, she only has two credit cards in her name and can continue to keep an eye on the cut up card.