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Catherine New Headshot

How Not To Break Up With A Credit Card

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For some people having a credit card handy is like an alcoholic near an open bottle of booze--they just can't leave it alone. And while I like to think I have more restraint than Lindsay Lohan at an open bar, I have been known to go on shopping benders.

There was a period of time I was enjoying the high life: new gadgets, designer shoes, Mexico vacations, all paid for using borrowed money. Meanwhile, my total credit card balance crept up to almost $30,000 at its highest point.

Last month I finally got clean and credit sober. After several years of austerity and chipping away at my debt, I paid off my Bank of American Platinum MasterCard with a final push from my tax refund. And just like an ex-boozer clears all the liquor from his house, I decided to cancel the card to keep extra temptation to spend at bay. I have one other credit card from American Express--and for now that is enough.

I know, I know. All the rules say that it is important to have a good debt-to-credit ratio. In other words, I should have kept that additional line of credit open even after I paid off the bill. And no one said I had to actually carry the card in my wallet. But I wanted it gone.

It has not been easy breaking up with my old friend, MasterCard. Just this week the bank sent me an email to tempt me with 5 percent cash back on purchases. I resisted. Yet in the throes of getting clean, I learned a few more lessons about credit cards--and how to cancel them, which I share here below with you.

Lesson #1: Watch out for the balance after the balance.

That zero balance I was celebrating on March 9 quietly crept back up to $13.53 by March 19. When I saw those numbers, the part of my brain reserved for bank-fee-rage went Code Red. I called up Bank of America to find out why I still owed them more money. While I had paid off my balance nearly two weeks earlier, the bank had yet to post the interest accrued during the first part of the month. Those charges are not posted until the last day of the billing cycle. Hence, the new final balance.

Better advice: Before you close your account, call the bank and get the final total figure.

Lesson #2: Don't throw a break-up tantrum on the phone.

You probably have it too, that special tone of voice you reserve for calling the bank. The tone is polite and you enunciate words to avoid miscommunication; you might even banter a little. But then the conversation takes a turn. It typically happens around the point where the customer service representative won't stop trying to upsell you on yet another service.

When I called to inquire about my leftover balance, it started well enough. But then came the hard sell: the double rewards points and low-interest on new purchases for the next six months. No, no, and no. And it ended with me canceling my card in a tantrum--not the carefully planned detox process I had hoped it would be.

Better advice: Make two calls. In the first call, deal with the business transaction of making the final payment. Then take a deep breath and wait 24 hours and call back to cancel separately. Some credit card experts also advise writing a letter to the bank to confirm both that the account is closed and that you canceled the card--rather than bank revoking your credit.

Lesson #3: Redeem your points before you cancel the card.

During the call where I canceled my card, I asked the representative how long my rewards points were good for. She promised I had up to two weeks to redeem them. Immediately after canceling the card, I dialed up the rewards office and I cashed in my points for $250 in gift cards. Then there was a pause. A long one. The call center worker told me that my points had disappeared over the course of the call to to redeem them. He called it a "system error." I threw a second tantrum but to no avail. Bank of America sent me a letter two weeks later to let me know that in the small print it says rewards can only be redeemed by active customers. Not those that left five minutes ago. Meanwhile, the Bank continues to send me marketing and advertisements to get me spending again.

Better advice: Cash in all your rewards points long before you cancel the card.

Lesson #4: Your credit score might take a hit.

A big part of having a decent credit score is both the longevity of credit and a debit-utilization ratio. In other words, they look at how long you have had a certain card and how much of your available credit are you actually using. (Hint: Less debt, more credit is the best.)

So do as I say, not as I do: If you are trying to build or maintain credit, experts say canceling a long-standing card with more than 10 years of good-payment history and a healthy five-digit line of credit, like I had, is not such a great idea. For me, it's too soon to tell what the effect on my credit score will be. (I do check my credit report at www.annualcreditreport.com).

Better advice: If you're planning to make a purchase in the next year that requires a a high credit score, don't cancel a card--just keep it at zero and out of sight. Other experts say it's better to cancel newer cards first to minimize the impact on the "longevity" element in your credit part.

But despite having made all the wrong moves to get clean from my long-term credit card habit, do I have any regrets? Nope. Like a true addict, I was doomed as long as I spent money in my old patterns. Ultimately, I was giving this credit card far more than it was giving me in the end.

One day, I might open another credit card, but until that day comes I'm happy with my debit card and one AmEx that remains buried deep in a drawer.