Cancelling a credit card is never as easy as putting scissors to
plastic. "People often say 'I'm going to cut up my card' but that
doesn't do anything," says Carolyn Bond, co-chief executive officer
of the Consumer Action Law Centre in Victoria. "You've still got an
account with that institution."
Cutting the card into small pieces won't stop that institution
charging you an annual fee or sending you a replacement card when
the original expires, she says. "It's so much easier to get a card
than cancel a card."
In the past most banks' terms and conditions required that, in
order to cancel a card, customers had to hand over the physical
piece of plastic.
"That presented a lot of problems in cases of marriage
breakdown, where, say, a wife couldn't return the card because her
husband was on a spending spree in Europe with it," Bond says.
However, revisions to the Code of Banking Practice in 2004 allow
primary cardholders to stop a subsidiary card after notifying the
bank of this intention and "[taking] all reasonable steps to have
the subsidiary card returned".
Most financial institutions' terms and conditions state
customers are required to cancel their cards in writing, sending
the document by post, or personally handing it in at a local
branch.
Your account remains open as long as you have an outstanding
balance; however, some institutions allow you to transfer that
balance to a new card.
But how do you manage all those tricky direct debits for things
such as utility bills, insurance and toll tags?
Deahne Falk, a spokeswoman for Virgin Money, says it's important
to contact all your service providers in writing and provide them
with your new account details "to avoid getting stung with any
nasty surprises"
Check past statements to ensure you've included them all and
look on your bills or in the White Pages to locate their contact
details.
Allow a few weeks for direct debits to transfer over to your new
account before cancelling your old credit card, she suggests.
Denis Orrock, the general manager of InfoChoice, says while it
is time-consuming, there are sound reasons to cancel a card, even
one on which you've transferred or settled the balance, rather than
let it sit inactive in your wallet.
"We live in a consumer society that has a want-it-now
mentality," he says. "If you're maxed out on one card and there's
another in your pocket, the temptation can be too great."
Financial institutions intentionally make it tough for people to
cancel their credit cards, because holding onto an existing
customer costs them less than finding a new one.
Many institutions suggest leaving the account open for up to six
months "under the guise of being able to meet any purchases that
have not been posted", Orrock says.
"But in that six-month period you'll be subjected to various
marketing offers, along the lines of, 'We know you've cancelled
your card but you're still able to reactivate it and experience the
benefits of being an XYZ Bank customer once more.' "
After cancelling a credit card recently, Orrock received a
statement in the mail requesting payment of the annual fee and,
when that wasn't paid, a "nasty letter" which threatened to blacken
his credit rating.
"We sorted it out eventually but how many people would just pay
the annual fee when the statement came in, or crumble when the
threatening letter arrives?" he says.
"People need to stand their ground. If you think that [your
institution] has not been good about it, then don't have any
hesitation taking it to the Banking and Financial Services
Ombudsman."
