How to close a credit account

I got the idea for this post when I blogged about closing my airmiles mastercard account and possibly also cancelling my line of credit. I think many (most? all?) of us are probably a little over-exposed on credit. This means we have the opportunity to borrow more than we can afford and we’re targets for identity theft — think an identity thief can get far with a maxed out credit card? Nope, it gets declined everywhere, but an empty credit card is a gem. Now I’m not saying go max out all your credit cards in order to protect yourself against identity theft, but I do encourage you to be aware of what’s available to a thief if they managed to hack your accounts.

How to cancel a credit card and close an account

1. Pay off or make a plan to pay off the balance. Please note that closing an account or cancelling a credit card does NOT clear you of any debt. Personally, I always like to completely pay off a card before I close an account, but you can often close an account before paying off the balance. All this means, however, is that you can’t add anymore to what you owe and you must still pay off the remaining debt.

 

2. Watch the account. Even though I didn’t have a balance on my credit card, I left the account open for another month just to see if there were any purchases I had forgotten about, any surprise outstanding interest or fees, or anything else. After 30 days of no activity, I proceeded to the next step.

3. Call the customer service number. Tell them you want to cancel your credit card and close the account. If they try to talk you out of it, be firm. They will confirm over the phone that the account has been closed and tell you to go ahead and cut up your credit card — that’s the fun part! The best I’ve seen in debt destruction is this viking funeral held for a credit card. If you’re not as creative you can do what I did and just hack it into bits with scissors and throw it in the garbage.

4. Wait for a letter of confirmation that says the account has been closed. You should get this within 2 weeks of making the call. If you owe anything more on the account, it will tell you here as well as instructions as to when and how it needs to be paid. KEEP THIS LETTER! File it away and/or scan it to keep an electronic copy, you might need it later. I think no one has worse luck than Krystal from Give Me Back My Five Bucks who saw repeated charges to her closed American Express account. Uncool, American Express!

5. Check your credit report. You should be getting your free credit report at least once a year to make sure you’ve got your borrowing ducks in a row. All open AND closed credit accounts should show up on your credit report. When I got mine last summer, it still listed and confirmed that I had closed a department store credit card 4 years ago. Make sure the account you cancelled shows up and shows up closed!

 

How To Live With No Money After Graduation

I quit graduate school in April 2011, and subsequently spent a very expensive month in France. When I got home,  I went to work only part-time. I had no money! Or at least I didn’t have any after I paid my bills and paid back what that vacation cost me. To add to my anxiety, I owed $20,000 in student loans. How the hell was I going to pay that?! I had NO MONEY! Thankfully, my stint of no money after graduation only lasted a few months, but for those of you still in the no-money phase after graduation, this post is for you!

How To Live With No Money After Graduation

1. Get more money. I feel like this is an obvious first step, but I’m surprised by how many people ignore it. If you feel you do not make enough money, the bulk of your efforts should be devoted to increasing your income. You can get more money through a variety of different ways:

  • ask for a raise at work
  • get a part time job
  • get a different job with higher pay
  • put a skill to use
  • sell items you no longer use or want

2. Make a budget and track your spending. If you hate this, know that I understand completely. I don’t like watching my spending, because when I pay attention, I notice that I spend a lot of money on stupid stuff that I don’t need. But the important thing is once you realize where your money is going, you can start getting organized. Would you be better off putting $50/mo towards your Starbucks habit or a down-payment on a home? Don’t get me wrong, I’m as addicted to Starbucks as anyone, but if you’re faced with an either-or choice, choose the option that matters.

3. Attack areas in which you are over-extended. After you’ve analyzed your spending and know where your money is going, it’s time to attack the biggest money-grabbers in your budget. I’m really keen on cutting the big things: move to a cheaper apartment, sell your car, etc. It’s hard to swallow, but I think if you can put $300/mo back in your budget by giving up your vehicle and taking public transit, it’s better than merely cutting $30 from your grocery bill. That said, if you’re in dire straits financially, be totally ruthless. Cut everything. Cancel your cable & internet, give up Netflix, line dry your laundry, make your own lunches & dinners, grow your own food, commit to not buying any clothing for a year, whatever it takes. Exactly how much of “no money” you actually have after graduation will ultimately determine just how much you have to cut, but no matter what, you have to get used to prioritizing your consumption and giving up the bottom 30-80% of it.

4. Understand this is 100% your responsibility, and whining about it doesn’t fix anything. I get it. I’m actually quite a big whiner myself: I’m cold, I’m tired, my feet hurt, I think I slept funny on my neck, etc. But I don’t whine about my job, my income, or my debt. Why? Because I have the power to change all those things (side note: I also have the power to wear a sweater, go to bed earlier and… well actually I don’t know what to do about sleeping funny, but I’m pretty sure it’s still my fault). If you have the power to change it, then do so — because no one else is going to.

5. Cheer up. It’s hard to live with little or no money. It’s stressful and embarrassing. You might even feel like university was a waste of time — where is this great job and higher income promised to post-secondary graduates? Remember that as long as you stick to suggestions #1 through #4 above, it means the bind you find yourself in is probably temporary. You have no money now, but you will soon, and then you’ll slowly be able to reclaim all the luxuries you’ve had to sacrifice in the meantime.

How To Spend Your Money After Graduation

This was another google search term that led to my site. It’s an even better question than the first one, What should your net worth be at 30? And I have a better answer!

After graduation you should spend your money on…

Your immediate needs. This means food & shelter. Make sure you have a roof over your head and more than left-over pizza in your fridge. Don’t go out every weekend to eat at restaurants and call it a “need” because it’s food — that’s entertainment. I suggest lots of fresh veggies & fruits, but you can live on mac & cheese if it’s your thing.

A small emergency fund. Work on building up a buffer of about $1,000 to see you through any immediate catastrophes, like reduced pay due to taking a sick day or an unexpected dental bill. If you own a car, I would suggest a slightly larger emergency fund of $2,000 or even $3,000.

Interview clothes. When I graduated, I found that I owned practically nothing that could pass for business dress. This was a mistake. Go ahead and make the investment in a few quality pieces to see you through multiple interviews and one week of work at a new job. Once you land said higher-paying, new job you can get wardrobe to see you through more than a week of work.

Resume help. I went to the career centre at my university to get help with my resume. It was only $20, but the return was tens of thousands in increased income when my resume got me the job I wanted. I know burgers & beer sounds like a better way to spend $20, but I swear you’ll be able to buy way more burgers & beer if you spend $20 on your resume first.

A library card. As a student you probably had access to a library for free, but now that you’re a graduate you’re going to have the shell out the whopping $12 or whatever to take out books. I think this is a really important place to spend your money because like the two points I listed above, it’s an investment in yourself. After graduation, I visited my local library to take out books like What Color Is Your Parachute? and Life After College to help me get the job I wanted. I also hung around to read the latest copy of MoneySense and Elle (hey, can’t be serious all the time). Your library is way better than spending money buying books new or subscribing to magazines.

Your student loan debt. To quote my favourite financial hero Lesley Scorgie: “Congratulations, you’ve graduated and here is your bill”. If you don’t need to take advantage of the grace period, don’t. Start making payments on your student loans as soon as you can, and make those payments as big as you can. The faster you become debt free, the sooner you can get on with the awesome adult life ahead of you!

Your retirement. You have an income, start saving it. If you’re in your 20′s, you only need to set aside about 6% of your income for retirement. If your income is small, a TFSA is a better vehicle than an RRSP, but I would suggest researching all your options before making any decisions, since what’s best depends a lot on your income and student debt situation!

Your long and short term goals. Think retirement sounds boring and far away? Me too. That’s why it shouldn’t be the only thing you save for. Want a car? Set up a car fund. Want to put a down-payment on a home? Set up a house fund. Want to travel Europe? Set up a travel fund. Put money aside to pursue a graduate degree. Start contributing a little bit of every paycheque towards your long and short term goals in a high-interest savings account.

Spending money in these places ensures you are self-sufficient, financially secure, prepared, and have a plan. You’re also supporting your local library!