How to cancel your credit card (it's harder than you think)

There are a number of reasons you may want to cancel your credit card - you may have applied for a balance transfer or you may not need it any more - and there are a number of steps you need to take to make sure it is done properly. As the government's MoneySmart website says, there is more to cancelling a credit card than just cutting it up.

"If you don't close your account properly, you could still be charged fees or penalties, even if you no longer use the card. You could also leave yourself open to undetected fraud if someone else uses your card without your knowledge," MoneySmart says.

One of the first things you should do is cancel any direct debit payments that are set up. Finder says direct debit can reactivate a cancelled card even when you've requested the account be closed.

Your balance must be zero before cancelling the card. Contact your provider to get the closing balance which will take into account any accrued interest. If you are doing a balance transfer you will need to wait until the transfer is completed.

You also need to think about any rewards points you have accumulated. Finder suggests you redeem them for rewards or transfer them to your frequent flyer account before requesting a cancellation. "All unclaimed points are forfeited when you close your account," says Finder.

After you have taken all these steps, call the provider to let them know you want to cancel your card and close the account. Keep in mind that if both you and your partner have the same card, only the "primary" cardholder can request the cancellation. If the card is in joint names, both of you must agree to close the account.

Some providers will agree to cancel the card over the phone. If you do it that way, Finder says you should record the date, time and name of the representative you spoke with.

Other providers may ask you to put the request in writing and should inform you of the best address for sending it. If you're really unlucky, they may ask you to go to a branch. Something to think about when talking to your provider is the annual fee charged on the credit card. Ideally you should try to cancel it before the annual fee is due to be paid but, if you have already paid the fee, you should ask for at least a partial refund.

Some providers will happily offer a refund if you are cancelling within three months of having paid the fee while with others you might have more of a fight on your hands. But depending on the size of the annual fee, it could be worth it.

After this is all done you should get a letter or final statement in the mail confirming the account has been closed. If you don't, follow up with your provider. Keep the letter as proof.

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