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Switching Credit Cards - Lessons Learned

By James Carlisle
April 23, 2001

Several years ago I set up a credit card with, shall we say, not the world's most reputable credit card company. After all, they offered me a gold card and an attractive introductory rate of interest. Recently though, and not before time, I decided to switch to a new card (I had decided to move banks and wanted to get everything, credit cards included, into one place). So, I got a closing balance off my old credit card company, sent them the appropriate cheque, confirmed that I'd cut up the card and set about cancelling the regular payments that I'd set up on the account.

This is where the problems began. You see, you have to cancel the payments with the company that receives the money. It isn't sufficient to tell the credit card company to stop the payments since, once they've been set up, they're obliged to make them. All this would be fine, except that the credit card company apparently wasn't able to tell me who I had payments set up with.

One of the regular payments was for about £10, once a year, to some restaurant discount company. I know it's not very clever, but I'd set it up a few years ago, never used it and had forgotten all about it. It seemed like a good idea at the time. Anyway, when the once yearly payment was made, my ex-credit card company wanted the money. Plus, of course, they wanted a penalty for non-payment since I'd closed the bank account that paid off the balance each month.

The other regular payment was to an Internet service provider in Australia. I've confessed before about my problems with that wealth destroyer which is financial inertia, and this amounts to another confession. I should have cancelled the payment ages ago and it's mostly my fault that I didn't but, one way or another, it was just very difficult to do. The phone was preferred over e-mails because it was apparently insecure for me to include my credit card details (despite the fact that the account was closed and, recently, the card had expired anyway). The telephone didn't work since, apart from timing differences, the only number on the website was for a freephone number which only worked in Australia.

Anyway, there was a certain amount of to'ing and fro'ing and every month that this continued, not only have I been hit with the charges from the Australian ISP, but I've also had to pay hefty penalties to the credit card company. The other day I finally closed the Internet account in Australia and I sent off one final cheque to settle the balance on the credit card. You can imagine my reaction when the cheque was returned to me because I'd failed to sign it.

Sometimes things are just meant to keep haunting you. Anyway, this sorry episode has taught me several useful lessons about using credit cards and I thought they'd be worth sharing.

1. Stick to a company that you can trust. My problems are mostly my own fault, but the credit card company hasn't been falling over itself to help me close the account. Customer service matters.

2. Be wary of setting up regular payments on a credit card. If you do so, be careful to keep track and make sure you can and do cancel them when they're no longer needed.

3. Make sure you don't get charged penalties by at least having a direct debit for the minimum amount each month.

4. If you cancel the credit card, make sure the account really is closed before you cancel the direct debit that pays it off.

5. Oh, and don't forget to sign the cheque you send in to close the account.

More: the Motley Fool's Get Out of Debt Centre