Five Facts About Declining a New Credit Card

Don't like your new credit card? You have the option of declining it.

Credit cards are one of the few products consumers buy where they can't examine it until well after they've completed the transaction. When you fill out that application, you don't know if your annual percentage rate will be 7.99 percent or 24.99 percent. And you don't know if your new card limit will be $500 or $20,000.

What the card issuer may not tell you in large type is that when the card comes, you don't have to accept it.

If the card doesn't meet the terms you anticipated, you can cancel it for any reason or no reason at all. You're not required to take on a card just because you filled out an application and received a piece of plastic with your name on it.

Thinking of rejecting a card that's already approved? Read on to learn five things to know about declining a credit card.

When a potential card issuer pulls your credit report for the purpose of granting credit, it's called a "hard inquiry." And, under many of the most popular score formulas, that could lower your credit score by a few points.

"The average person's score will take a slight dip," says Anthony Sprauve, spokesman for FICO, the company that pioneered credit scoring.

The fact that an issuer has pulled your report will show on your credit history for two years, but it will only affect your FICO scores for a year. So it's that application process (approved or not) that potentially lowers the score.

If you're declining the card you've just received to open another, it might be smart to wait until the first account shows as "closed" on your credit report -- so issuers don't assume you're opening a glut of credit cards simultaneously.

And recognize that each time you apply for a card, you face the possibility of a penalty stroke on your credit score, which could lower it slightly for up to a year.

It seems counterintuitive. When you get a new card, you're often instructed to sign and activate it. So it stands to reason that if you don't take those steps, the account isn't open, right?

Not necessarily.

That's why in declining a card you don't want, you can't just ignore it. "Activation, no activation, that doesn't matter," says Karen Barney, program director at Identity Theft Resource Center. "You want to close the account."

Here's how.

Call the customer service line, and tell them you're closing the account, says Barney. Ask them to send you a letter documenting the date the account was closed so you can prove it if you have to.
Follow up your request in writing and mention the phone call. Send the letter certified with a return receipt requested. (That proves the letter was both sent and received and on which dates.)
Destroy the card itself and keep a written record of everything -- letters, mailing receipts and notes summarizing your phone calls (names, dates, what actions were promised), says Barney. If you want to deep-six the paper, scan everything into an electronic file.

Some issuers charge fees to open an account and bill those to the card. Before you close the card, those fees have to be paid or waived.

"I would say talk to your creditor," says Danielle Fagre Arlowe, senior vice president with the American Financial Services Association, especially if you've truly not used the card. "They may not hold you responsible."

Even if you are responsible, the issuer might forfeit the fees if you're declining the card and have never used or activated it.

Even if a fee is labeled "nonrefundable," if you've never used the card, ask for the fee to be dropped. And get verification of that action in writing.

If you happen to receive a balance statement (or two) in the interim, confirm that the balance reads zero, says Arlowe. "Make the request, and then double-check it on the back end."

You might receive a few statements after you've closed the account, says Arlowe. While it doesn't mean something is wrong, you don't want to ignore them, either. "Keep opening those statements, and make sure there's a zero-dollar balance there," she says. And, after a statement or two, they should also show that you have closed the account, Arlowe says.

After a couple of months, pull your credit report. If the account is listed (it might not be), it should show as "closed at the consumer's request," says Barney. "That way, anyone reading the report will know it was closed by customer request," she says.

If it still shows that it's open, don't panic, says Arlowe. Sometimes it can take a while for bureaus to update information. "I wouldn't be alarmed if it was still there after a couple of months."

So if you're declining a card, wait a few months and check it again, she advises.

If you've just received the card and never used it, it's "possible that the account can 'erase,'" as if it had never existed, Arlowe says. "And there would be no statement because there was never an activity to report."

Or, issuers could decide that the account was opened when the card was issued and continue to report it to the bureaus for the next seven years, she says.

Reported or not, since you closed the account in good standing, it won't be factored into your score, says Sprauve.

And, realistically, a lot of issuers won't go to the trouble of reporting on a closed account, much less reporting on it for seven years -- especially if you're declining it and it's never been activated, says Arlowe.

Another option: When you close the account, ask the issuer not to report it to the credit bureaus, says Arlowe. While it's up to issuers and bureaus, there's really no reason to refuse the request, she says. But it's your responsibility to follow up to see that it's been done.

Arlowe's advice is to check your credit bureau reports in a couple of months. And, if it's still there, don't stress, she says. "Request it again."