New credit card applications can be interesting. To entice you to apply, they may offer you a generous welcome bonus or an immediate discount on your first purchase. However, once you have the card in your hand, you may realize that it’s not the best for you. Occasionally, you may even regret the decision before your card arrives.
The question is, if you apply for a credit card, do you have to accept it? The short answer is yes, but you can cancel it right away. However, that decision will affect your credit score.
What happens if you don't activate a credit card?
When you’ve been approved for a new credit card, your account is already open. Not activating the physical card doesn’t change anything. If you no longer want the card, your best bet would be to activate it and then call customer service to formally close your account. By doing this, you’ll get a formal cancellation number and a letter that formally says your account has been closed.
How to activate a credit card
Activating your credit is usually done by doing one of the following:
Calling the number on the sticker that comes with your new card
Logging into your online banking account or mobile app.
With both options, you’ll need to enter the credit card number, expiration date, and CVV. Once your card has been activated, you’ll be able to use it to make purchases. Note that some cards provide you with a virtual card upon approval which can be used instantly. You could also cancel your card immediately after if you so desired.
Consequences of not activating a credit card
If you decide not to activate your credit card, you won’t be able to use it. Since you’re not using it, you may not be able to earn the welcome bonus, and you’d have less purchasing power since you can’t use the card. In addition, you may not be able to use some of the perks that come with the card, such as purchase insurance, since you’d have to charge the purchases to your card. Overall, the consequences of not activating your card are pretty minor. That said, if you don’t want the card anymore, you should still activate it and cancel it right away.
Impact on your credit score
Not activating your new credit card has no impact on your credit score. That said, your credit score would have already taken a hit when you applied for the new card. That’s because whenever you apply for credit, a hard inquiry is performed against your credit profile. That hard check results in a drop of about 10 points on your credit score.
What happens when you decline a credit card offer?
A credit card offer is different from a credit card application. With an offer, the credit card provider is simply giving you an incentive to sign up. This welcome offer often comes in the form of reward points, cash back, and annual fee rebates. Note that declining an offer or pre-approval for a new card has no impact on your credit score since you haven’t applied for new credit.
How to decline a credit card offer
To decline an offer, all you need to do is say no. If you’re in a bank branch or talking to customer service, they may pressure you some more by telling you about the additional benefits that come with the card. Generally, if you say no again, they’ll stop bothering you. Online refusals are much easier since all you need to do is click no.
Possible consequences of declining a credit card offer
In most cases, there are no real consequences when declining a credit card offer, but you should keep the following in mind:
The offer won’t last forever: Credit card offers typically change every three to four months. What you’re being offered now may not be available later. There’s no way of telling if the future offer will be better than what you have access to now.
Your credit score may be affected: Nothing will happen to your credit score if you decline a credit card offer. However, had you said yes, your credit score might increase since it could lower your credit utilization ratio, and you may have access to different kinds of credit.
Can you cancel a credit card you no longer want?
Whether you’re replacing your current credit card or you have too many credit cards, you can cancel a credit card you no longer want at any time by calling customer service. That said, there are many things to think about before you close out your account.
The process of cancelling a credit card
Cancelling your credit card is easy since all you need to do is call customer service. However, there are quite a few things you’ll want to take care of before cancelling.
Pay off your balance: You can’t close your credit card if you have an existing balance. Once that’s paid off, you can cancel it at any time.
Redeem any unused points or cash back: The rewards you’ve earned with your credit have real value. Try to redeem everything before you cancel, so you’re not giving anything up for free.
Change your pre-authorized payments: Before cancelling your card, switch or cancel any recurring automatic payments from your credit cards to ensure you don’t get hit with any non-payment charges.
Once you’ve done all of the above, you can call customer service to cancel your card. Make sure you get a reference number to ensure the account has formally been closed in good standing. About a week later, you’ll get a physical letter stating your account has been closed. Keep that letter, as it’ll give you a record in case you need it in the future for any reason.
Factors to consider before cancelling a credit card
Cancelling a credit card shouldn’t be done on impulse. Instead, you need to consider various scenarios, as cancelling your credit card can affect many things.
Your credit score. If you’re cancelling your oldest credit card, your credit score may drop since your length of credit and credit utilization ratio helps determine your credit score.
Card activity. Cancelling a credit card you use daily is not a great idea unless you plan on using a different card instead. You’d also have less access to credit.
Rewards earned. Many credit cards offer rewards on every purchase you make. If you cancel your card, you’ll earn fewer rewards and possibly give up what you’ve already earned.
Types of credit. There’s nothing wrong with cancelling an old credit card, but will you still have access to different types of credit? For example, having two different kinds of credit cards (Visa, Mastercard, and American Express) can be useful in case your primary card is ever declined.
Alternative methods. Instead of cancelling your credit card, you could ask for a lower credit limit or switch to a no fee card. This could potentially address your needs without cancelling.
The bottom line
Having second thoughts about a credit card you just applied for is perfectly normal. However, if you’ve thought things through and know that you don’t want the card, you should still activate it first. Once you’ve got things set up, you can ask for the account to be closed immediately. Your credit score would have already taken a hit, but you shouldn’t worry too much about that, as it’ll likely go back up over time.
Barry Choi is an award-winning personal finance and travel expert. He regularly appears on various shows in Canada and the U.S., where he talks about all things money and travel. His website - Money We Have - attracts thousands of visitors daily, looking for the latest stories on travel and money.