Closure of Credit Card Accounts and Liability for Charges
Often, individuals wonder if canceling their credit card will stop them from being charged. This article aims to clarify the situation and help readers understand the implications of closing a credit card account.
Understanding the Obligation to Pay the Balance Due
When you decide to close a credit card account, it is important to understand that any balance due must still be paid. Contrary to some erroneous claims, merely closing the account does not exempt you from liability for pre-authorized charges or recurring payments.
Factors Influencing Post-Closure Charges
Several factors can determine whether you will still be charged after closing your credit card account:
1. Cancelling vs. Keeping a New Credit Card Number
If you close your credit card account, you cannot be charged for any new or existing purchases or recurring charges unless the issuer chooses to impose otherwise. However, if you keep the original account but request a new card number, the charges will still be processed by the issuer's systems.
2. Pre-Authentications and Security Authorizations
Car rental agencies and other businesses often obtain pre-authorizations on your credit card. These authorizations hold a specific amount as security for potential charges. Closing your account will not automatically resolve or void these pre-authorizations. The pre-authorization will expire after approximately 5 business days if no matching charge is placed, but you should check with your credit card issuer to ensure that the pre-authorization has expired before closing your account.
3. Recurring Payments and Subscriptions
Subscriptions to streaming services and other recurring payments typically require a secure payment method. If you cancel your credit card, these services may be impacted. You will need to make other arrangements to continue these subscriptions or potentially risk cancellation.
Immediate Liability and Balances
Cancelling your credit card can result in immediate liability for the balance on your account. If you do not have enough funds to pay the balance in full, it is crucial to understand the potential financial repercussions. In most cases, you should avoid canceling the card until the balance is paid in full to avoid accruing additional interest and fees.
However, if you have enough funds to pay off the balance immediately, discontinuing use of the card and paying off the balance can be a safer option. This approach prevents any further charges and allows you to manage your finances more effectively.
Conclusion
Understanding the true implications of closing a credit card account is vital for making informed financial decisions. Whether you are dealing with recurring charges, pre-authorizations, or outstanding balances, it is essential to carefully evaluate your situation and take appropriate action.
For further guidance, consider consulting with a financial advisor or your credit card issuer. This can help you navigate the complexities of ending a credit card relationship and ensure that you do not face unexpected financial challenges.
Remember, the key to managing your finances effectively is to stay informed and proactive about your obligations and rights as a cardholder.