- How Closing Credit Cards Could Hurt — Not Help — Your Credit
- Age of Accounts
- Issuers May Close Inactive Cards
- 1) Not Enough Value From the Annual Fee
- 3) Another Signup Bonus
- 4) Divorce
- Closing a Card With a Balance
- Will Closing a Credit Card Hurt Your Credit?
- When It's Better to Keep the Card
- How to Close a Credit Card Safely
- Alternatives to Canceling a Credit Card
- Check Your Credit Before Closing an Account
- How to Cancel a Credit Card Without Hurting Your Credit Score
- How to cancel a credit card the right way in 7 steps
- First step in canceling a card: evaluate impact on credit score
- Old credit is the best credit
- How to cancel a credit card in 7 steps
- 1. Find the number of the customer service department you need to contact
- 2. Redeem any remaining rewards
- 3. Pay off any remaining balance
- 4. Call your bank
- 5. Send a letter requesting card account closure, just to be sure
- 6.Check your credit report to confirm the cancellation
- 7. Dispose of your card properly after confirming cancellation
- Is Closing A Credit Card Bad?
- How does closing a credit card affect credit?
- Closing your oldest credit card can lower the length of your credit history
- 5 reasons you shouldn’t close a credit card
- 5 reasons you should close a credit card
- The best way to close a credit card
- Pay off (or transfer) your outstanding balance
- Use any remaining rewards
- Contact your credit card issuer
- Follow up with a certified letter
- Check your credit reports
- Destroy the credit card
- Alternatives to closing a credit card
- Swap your card
- Upgrade to an unsecured card
- Keep the card for small regular payments
- Bottom line
How Closing Credit Cards Could Hurt — Not Help — Your Credit
Whether you have a card you never use or a pull-your-hair-out experience with a particular card issuer, there will probably come a day when you want to close a credit card. But before you get worked up, call your credit card company, and cancel your card, be sure you understand the potential consequences of that decision.
Closing credit cards could lower your credit scores — but in a few cases, it’s a wise move.
Read on for reasons why you shouldn’t close a credit card account, plus three situations when closing a credit card makes sense, and how to do so safely.
There are two ways that closing a credit card might negatively impact your credit scores:
- It reduces how much available credit you have, and that could increase your overall credit utilization ratio (potentially a big deal)
- It eventually reduces the age of your accounts (not as big of a deal)
An important factor considered in the calculation of your credit scores is your credit utilization ratio. which compares your total available credit to your total balance (or total credit card debt). In general, the lower your utilization ratio, the better your credit scores.
When you close a credit card, you reduce your total available credit (aka credit limits). This can potentially increase your utilization rate if your credit reports show outstanding balances on any of your credit card accounts.
If you close a credit card and your credit utilization rate increases as a result, there’s a very good chance that it will have a negative effect on your credit scores. In fact, depending upon how much your utilization rate increases and the rest of the information on your reports, that card closure could impact your scores significantly.
Here’s an example of how closing a card could increase your utilization rate:
- You have four credit cards with credit limits of $3,000 each, making your total credit limit $12,000. If you carry a $1,000 balance on three of those cards, your total balance is $3,000 — and your credit utilization rate is 25% ($3,000/$12,000 = 0.25).
- If you close your unused card, you’ll reduce your total available credit to $9,000. So, assuming your balance stays the same, your new credit utilization rate will be worse: 33% ($3,000/$9,000 = 0.33).
Remember, the negative impact of closing a credit card varies depending on the other accounts you have on your credit reports. Often, the more credit accounts you have, the higher your credit limits may climb. If you have high limits and low balances on most of your credit cards, closing one of your accounts is less ly to cause big credit score changes.
Age of Accounts
When it comes to credit scores, longer credit history is better.
Credit scoring models, FICO, consider many factors when calculating your scores, including:
- How long it has been since you opened your oldest account
- The average age of all of the accounts on your credit report
A common credit myth leads many people to believe that closing an account will remove the item from your credit reports. A twist on that myth says that the item remains on your reports, but scoring models no longer consider it when calculating your average age of accounts. However, both of the above are untrue.
Positive closed accounts will continue to appear on your credit reports for up to 10 years after they’re closed. They’ll continue to age throughout those 10 years and be counted in your average age of accounts. That’s good for your credit scores.
If you think closing an old credit card will erase bad payment history, think again.
It’s not a magic wand: Payment history, including late payments, will also remain on your reports and affect your scores after you close an account.
The only difference is that, with negative accounts, the Fair Credit Reporting Act typically requires that they be removed from your reports after 7 years, not 10.
Eventually, after 7 to 10 years, closed accounts will no longer show up on your credit reports. That means you’ll lose out on the potential value of the age of the card. In FICO Scoring models, your credit history length is worth 15% of your credit score.
So, while it’s not always going to be the end of the world to have an old account removed from your reports, there is a possibility that the card’s eventual removal could inflict some damage.
As a rule of thumb, it’s better for your credit to keep older accounts with on-time payment history open for as long as you can.
Don’t plan to use your credit card in the near future? That doesn’t necessarily mean you should close it.
Here are five reasons why it’s a smart idea to keep credit cards open:
- Your card will continue to age: As you now know, older accounts on your credit reports can mean better credit scores. If a card isn’t costing you money, why close it?
- Your credit utilization rate may stay lower: Having a card you don’t use will increase your overall credit limit. This can help to keep your utilization rate lower when you do use other cards.
- You’ll maintain variety: Credit scoring models to see a variety of accounts on your credit reports, including credit cards and installment loans.
- You’ll have a backup credit line: It can be pretty useful to have a credit line of a few thousand dollars tucked away for emergencies.
- You’ll have access to benefits: Besides basic rewards points or cash back, your card may also have extra benefits and features you don’t want to lose. (Think: shopping and travel protections and discounts, access to high-end entertainment and services, or brand-specific benefits.)
By paying your balance in full each billing period, you’ll completely avoid interest charges — and continue to reap the benefits. And best of all, cards without annual fees won’t cost you a cent.
If you really don’t want to use your card anymore, consider putting it in a safe spot instead of closing it. That way, it’ll be there if you need it — but won’t tempt you it would in your wallet.
Issuers May Close Inactive Cards
One of the ways card companies make money is through swipe fees when people use their cards.
Maintaining an account costs credit card companies some overhead, so if they’re not making money from you they may close your unused card for inactivity.
You can usually avoid this by using your card at least once every six months.
Earlier we mentioned that closed, positive accounts can stay on credit reports for up to 10 years from the time the account is closed. Even if a credit card issuer eventually closes your account for inactivity, your credit will ly be better off than if you proactively closed the card yourself.
You may have several more months or years between when you considered closing the card and when the issuer actually starts the 10-year clock by closing it for inactivity. Or, if you’re willing to use the card just a few times a year, even for a small purchase, you may be able to avoid having the account closed altogether.
Although there are many reasons to keep your cards open, there are also some good reasons to close your credit cards.
You should consider closing a card if you find yourself in the following scenarios:
1) Not Enough Value From the Annual Fee
If you have an unused card that comes with an annual fee, it’s probably wise to close it.
Unless you’re earning enough rewards or benefits to make up for the annual fee — which is unly if you’re not using it — your card is costing you money instead of providing a valuable service.
Does this sound your situation? Consider downgrading your credit card to a different card without a fee, or product changing to a card you’d actually use. This will (usually) let you keep the same account open, so your credit scores won’t be affected.
If you want to replace the card to continue building credit, opt for one of the many cards without an annual fee.
If you’ve been using a secured credit card and have built up your credit scores enough to qualify for better cards, it may be time to close out your secured card and get your deposit back.
You’ll just need to pay off your balance in full; then you can close the card, and the issuer will send your deposit back.
Now, with higher credit scores and a more established credit history, you can set your sights on reward cards, cash back cards, travel cards, and more!
3) Another Signup Bonus
Some cards, travel rewards cards in particular, offer generous signup bonuses for opening a new card: 50,000 points, for example, after you spend $3,000 in the first three months.
Though these offers are sometimes limited to once per person per lifetime, others give you the chance to get the bonus again after a year or two.
If you already got a signup bonus with a card, but you’re not getting value from it anymore, consider closing it if you might be able to get an introductory bonus again in the future. It may come in handy when you’re planning a trip, or your lifestyle changes and you’re traveling more. Just read the terms and conditions carefully before going this route.
If you share a joint credit card account with a spouse, it can be a big problem during a divorce. With a joint card, both cardholders are legally liable for the debt and can make changes to the account. So, if your ex charges up a huge balance on the account before you separate, you could be left holding the bag financially for his/her shopping sprees.
Your best bet is usually to close joint credit cards during a divorce. This prevents both you and your ex from making any new charges. If you want to protect your credit, you’ll need to continue making payments on the account (or make sure your ex is doing so) until the balance is paid off in full.
Note: If your ex is simply an authorized user on your account (or visa versa), it’s easy to have the other person removed from the account. This stops any future charges from taking place.
But you’ll still have to work together or through the court to make sure any outstanding balance is covered.
Remember, if you’re the primary account holder, you’re not off the hook from a credit perspective until the balance is $0.
Closing a Card With a Balance
If you’re carrying a balance on a card and want to close it, it’s best to pay off the debt first. We recommend the avalanche method.
You don’t need to close your card just because it has a high interest rate, though. You could consider transferring the balance to another card with a lower interest rate. Some cards are designed for this purpose, with a long 0% introductory APR on balance transfers.
When you transfer a balance, there’s no need to close the card you transfer a balance away from — as long as it has no annual fee you’re probably better off leaving it open with a $0 balance and not using it.
Decided that closing a credit card is the right move for you?
Here’s how to do it the right way, so it has the least potential negative impact on your credit scores.
- Completely pay off the credit card balance (and, if the rewards are card-specific — i.e. Chase Ultimate Rewards points instead of Delta SkyMiles — be sure to redeem them so you don’t lose them).
- If you have another card from the same issuer, ask to transfer the old card’s credit limit to the card you’re keeping (therefore maintaining the same amount of total available credit).
- To prevent or minimize any increase in your credit utilization ratio, ask for credit limit increases on any cards you don’t close — or make additional payments to reduce their balances.
- Close your card by calling the number on the back (find customer service department phone numbers here). You can also request a freeze on your card to prevent new charges from being made on it.
Closing a card may take some time, so be patient.
I wasn’t really benefiting much from my Starwood Preferred Guest American Express anymore, so I decided to close it to avoid the annual fee.
Before I closed it, I called American Express and asked if they could transfer the $11,000 credit limit to one of my other American Express cards.
That worked, so I ended up with a $19,000 credit limit on another American Express card that previously only had a limit of $8,000. This kept my credit utilization the same even though I closed a card.
– John Ganotis, Founder, Credit Card Insider
Intelligent credit use sometimes — but not often — means closing credit cards that aren’t working for you.
Weigh the pros and cons first. If you decide it’s time to part with a certain piece of plastic, be sure to follow the above steps to minimize any damage to your credit.
Will Closing a Credit Card Hurt Your Credit?
There are many reasons why you might want to cancel a credit card. Perhaps you're tired of paying the annual fee, you have no use for it anymore, or you're ready to upgrade to a card with a better rewards program. But not so fast: Closing a credit card can hurt your credit, especially if it's an account in good standing that's been open for several years.
Here's what you need to know about how closing a credit card affects your credit.
Closing a credit card can affect your credit score for a few different reasons.
For starters, when you close a credit card account, you lose the available credit limit on that account.
This makes your credit utilization ratio, or the percentage of your available credit you're using, jump up—and that's a sign of risk to lenders because it shows you're using a higher amount of your available credit.
Experts recommend that you keep your utilization rate under 30%, and in general, the lower the rate, the better. To calculate your credit utilization ratio, divide the total of all your credit card balances by the total of all your credit limits; your resulting percentage is your utilization ratio.
Closing a credit card can also affect your score because it can lower the average age of accounts on your credit report, especially if it's an account that's been open for a long time.
The age of your accounts is factored into your credit score, with longer payment histories bolstering your credit score.
This shouldn't cause immediate concern, however, since accounts closed in good standing stay on your credit report for 10 years and are factored into credit scores the entire time they remain. Closed accounts that have missed payments associated with them will remain on your credit report for seven years.
While your scores may decrease initially after closing a credit card, they typically rebound in a few months if you continue to make your payments on time.
It becomes evident that you just closed an account and didn't take on new debt, but it can take some time.
So don't cancel a credit card if you plan to apply for other credit, such as a mortgage or auto loan, in the next few months.
There are a few situations in which it may make sense to cancel a credit card. For example, if:
- The card has a high annual fee and the benefits aren't worth it to you
- The interest rate on the card is high and you need to carry a balance
- You are struggling to manage your debt load and are having trouble resisting the temptation of living beyond your means with the card
- You want to get rid of a bare-bones card, a student card or secured card, in exchange for a regular or rewards card
When It's Better to Keep the Card
On the flip side, there are certain circumstances when it can be wiser to keep the account open, such as when:
- It's the oldest account on your credit report
- You don't have many other open credit accounts, which can result in a thin credit file, making it harder to qualify for future credit
- The only reason you're canceling it is that you don't use it very often
How to Close a Credit Card Safely
If you've decided that it makes sense for you to cancel your credit card account, here are the steps to take so you have no issues:
- If you have an outstanding balance, reach out to your credit card issuer and come up with a plan for paying it off. If at all possible, pay off the card before canceling.
- If it's a rewards credit card, redeem any outstanding rewards so they don't go to waste.
- Contact customer support and let them know you'd to close the account, and ask that they confirm it with a notice in writing. Ask that it be noted that the account was closed at your request.
- Follow up with a short letter to confirm your cancelation in writing. In this letter, you should put your name, phone number, address, credit card account number and any details about your call with customer service. Make sure to note that you want the account closed at your request, and keep a copy on file just in case. It can take a few weeks for your request to be processed, but if you haven't received a confirmation letter within a month, call your credit card issuer to follow up.
- If the credit card is connected to any automatic payments, such as your cell phone bill or Spotify account, go through those accounts and update your payment information to another option so you don't accidentally miss any payments.
- If you have any authorized users on your credit card account, let them know that you are closing the account and ask them to destroy their card.
- Now it's your turn to properly destroy your credit card. If your shredder is capable of shredding cards, put it through that. If not, cut up the card thoroughly, and consider putting pieces of it in different trash bags around your home, which would make it harder for a potential thief to find and piece together your credit card information.
Alternatives to Canceling a Credit Card
If you've decided it's worth it to keep your card around to help your credit, there are a few ways you can remedy the issues that were leading you to want to cancel the card.
For credit cards with burdensome annual fees, call your issuer and ask if they would consider lowering or waiving the annual fee for a year. Some credit card issuers are willing to do this as a way to retain customers.
If you're worried you'll overspend or get into more debt if you keep the card, stash it somewhere secure or even freeze it in a block of ice.
If you're really struggling to resist the temptation, some issuers will let you pause your credit card account, meaning it can't be used by anyone, but it isn't closed.
Call your issuer's customer support and ask whether this is an option.
If you want to cancel the card because you rarely use it, keep it active by either putting one small purchase on it each year or putting a small recurring monthly charge on it—for example, your Netflix account.
Just make sure you don't forget about it, and always pay it off right away so you don't get stuck paying interest.
This will help keep your account open and active without you having to think much of it, since some issuers will automatically cancel a card if there is no spending activity for a year.
Check Your Credit Before Closing an Account
Closing a credit card account can make sense in certain circumstances, but it's important to understand that it can adversely affect your credit score.
Before your close your account, consider taking a look at your credit report to see where you stand and make sure that closing the account won't leave you with a credit history that's too thin or too new.
While the negative effects of closing a credit card account are usually temporary, it might be worth keeping a long-standing account open if you're able to.
How to Cancel a Credit Card Without Hurting Your Credit Score
Need help?Check out these resources to master the credit card fundamentals.
See more credit card help stories
You want to cancel your credit card.
Before you pick up your scissors, though, know this: Canceling a credit card the right way involves more than simply snipping it in two.
It requires you to follow specific steps to close the credit card account for good – with the least damage to your credit score.
Here’s everything you need to know to cancel a credit card successfully.
How to cancel a credit card the right way in 7 steps
The first question to ask yourself before canceling a card is: Do you really need to cancel it? Or would it be better to just put it away and not use it? Having an available line of credit on a card with no balance always helps your credit score, and it could come in handy in an emergency or if its terms improve in the future.
However, there are two occasions when closing a credit card is called for:
- You can’t control your spending and need to remove the temptation.
- You are paying an annual fee for a card you do not use.
In those cases, it makes sense to cancel cards, since they are unnecessarily costing you money.
See related: Terms and benefits checkup: Assess your credit card’s value
First step in canceling a card: evaluate impact on credit score
Before closing any credit card account, you need to consider the possible effect on your credit score. Just because you cancel a credit card doesn’t mean that its payment information comes off your credit report right away.
In the case of open accounts, positive credit data can stay on the credit report indefinitely. Closed accounts with zero balances and no associated negative information typically remain on a credit history for 10 years from the date they are reported closed.
Most bad marks on your credit report have a quicker expiration date. Under the Fair Credit Reporting Act, negative data such as late payments and foreclosures must come off the credit report after seven years.
“If the account is never again positive, is charged off and sent to collections, the original account and any subsequent collection account will be deleted at that time,” says Rod Griffin, director of public education with credit bureau Experian. “This allows the positive information to remain longer than most negative information.”
In addition, potential lenders take into account the amount of credit still in use once a card and its associated credit limit gets canceled. That’s because credit bureaus and lenders are interested in what is known as a balance-to-limit ratio, also known as your credit utilization ratio, which compares the amount of credit being used to the amount of total credit available to the borrower.
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“The ratio is more important today than how much available credit you have,” Griffin says. From a lender’s standpoint, “a low balance-to-limit ratio is a strong indicator of good credit risk,” he says. To offset the closure of one account, for example, you can request a credit limit boost on another card in order to maintain the ratio.
Depending on your total available credit, closing a credit card account with a high credit limit could hurt your credit score, particularly if you have high balances on other cards or loans.
To make sure closing one card doesn’t impact your score, pay off balances on all other cards. If you have zero balances, your credit utilization rate is zero, and won’t be impacted by the loss of a balance.
However, experts say this step may be unnecessary for most people.
“If a person established good credit, the impact of card closure should be minimal and short-lived,” says Christina Goethe, former spokeswoman for FICO, the provider of the most commonly used credit score.
“If a person established good credit, the impact of card closure should be minimal and short-lived.”
See related: Will canceling a new, unused card hurt your credit score?; When can a card issuer close your account? Anytime it wants
Old credit is the best credit
The age of a credit card account is also an important consideration. “The time an account has been open is a factor in credit scores,” Griffin says. “A longer positive history is beneficial to credit scores. So, closing an older account in theory could have a more negative impact.”
How negative? There’s no single answer, Griffin says. “Credit scores weigh everything in a person’s credit history in relation to each other. So, for one person, closing an older account can represent higher risk than it does for another person solely because of the unique nature of their overall credit histories.”
If you are young and have a short credit history, closing the account could hurt your overall credit score more than if you were someone in their 50s who has a much longer credit history.
As stated earlier, closing the account doesn’t wipe that account history off your report, so if you open a new credit card with more attractive terms to replace the card you’re canceling, your credit score won’t take a big hit.
How to cancel a credit card in 7 steps
Provided you have considered these issues and have another credit card you can make charges on, you are ready to cancel your credit card. Closing an account the right way takes a little time, patience and organization.
As you go through the process of canceling your credit card, you may want to keep thorough notes on who you spoke to, what they said and when. That way, if anything goes wrong, you will have all the facts recorded.
Use the following steps to cancel your credit card the right way.
1. Find the number of the customer service department you need to contact
To begin the process of closing the account, gather and write down the customer service number and the mailing address you’ll need. The customer service number is on your credit card, monthly statement and the issuer’s website; the mailing address is also on the website and the monthly statement.
2. Redeem any remaining rewards
In the case of rewards cards, it is common to lose some accrued rewards when a card is closed, and this may be unavoidable. But with planning, it should be possible to minimize the loss.
Check the rewards balance and redemption procedures on the issuer’s website.
If you are unable to apply them to travel or merchandise, you may be able to take accumulated miles or points as a statement credit.
Cash back credit cards generally have the easiest redemption features. However, most of them require rewards to reach certain thresholds usually – $20 or $25 – before you can redeem for a statement credit.
A few cash-back programs award accrued cash only once a year, on a predetermined schedule. Knowing the rules for redemption will allow you to plan how to capture built-up rewards before you cancel the card.
Knowing the rules for redemption will allow you to plan how to capture built-up rewards before you cancel the card.
3. Pay off any remaining balance
Pay off your credit card in full or, if you can find a balance transfer card with better terms, transfer the balance. You can’t completely close a card until the balance is paid.
If you don’t want any more charges accrued to the card until the balance is paid, you can contact the issuer and ask that the card be frozen until the balance is cleared and the card closed.
If you normally carry a balance from one month to another, you will need to pay the full statement balance two months in a row to wipe out the balance and stop further interest charges from accruing.
4. Call your bank
Once you reach the bank’s customer service representative, confirm that the balance on your credit card is zero. Do not assume that the balance is zero because you paid the total amount on your most recent bill. Interest may have continued to accumulate between the time the issuer sent the bill and your payment was made (that “leftover” amount is called residual interest).
Once you’re certain the balance is zero, inform them that you are canceling the card. While some credit card companies will allow you to cancel without even speaking to a representative, others may be less obliging.
If you are met with resistance, hold firm. It is your right to close the account. Tell the rep you want it noted that the account is being closed at your request.
Ask for a name and address you can write to with a notice of your card cancellation and note this along with the call details, including date, time and a way to identify the representative you spoke to.
If you are met with resistance, hold firm. It is your right to close the account.
5. Send a letter requesting card account closure, just to be sure
For added insurance (in case the customer service rep makes a mistake), write a short cancellation letter to the card issuer. Request written confirmation of the account’s closure.
The letter should include your name, address, phone number and account number, and details from your earlier phone call. Also, state that you want your credit report to reflect that the account was “closed at the consumer’s request.”
Along with the letter, include the check number (or a copy of the canceled check or other payment verification) that you used to pay off your account balance.
Make a copy of the letter for your records. Send the letter via certified mail or with return receipt requested, so you can prove the company received your letter.
6.Check your credit report to confirm the cancellation
Then sit tight. Getting the card canceled may take a month or more. After that time, take a look at a copy of your credit report to make sure the account is marked as “closed.”
You can pull a free copy of your credit report once a year from each of the top three credit bureaus (Equifax, Experian and TransUnion) at AnnualCreditReport.com. You can also get a free credit score and report from Bankrate.
If the account appears open, repeat the process: Call the customer service number to report the mistake, follow up with a letter by certified mail (including a copy of your original letter requesting that the account be closed) and then check your credit report again.
If that fails, you can file a dispute through one of the three credit bureaus (they are required to notify the others). And if that doesn’t work, you can file a dispute with the Consumer Financial Protection Bureau.
7. Dispose of your card properly after confirming cancellation
After documenting the cancellation process and making sure that your credit report reflects the closed account, you are finally free to discard your credit card. There are numerous ways of destroying of your plastic (or metal), but you’ll need to pick a disposal method that leaves your information completely unrecoverable from identity thieves.
If you do decide to pick up the scissors, make sure that you are cutting each bit of information including your card number, CVV, expiration date and signature. For a demonstration, check out our “How to destroy a credit card” video.
Although it may be worth temporarily holding off on closing a credit card if you are in the market for a new loan or mortgage, canceling a credit card shouldn’t be a source of major concern for consumers with good credit, since the resulting impact on their credit scores is ly to be minimal and temporary.
Updated: December 10, 2020
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
Is Closing A Credit Card Bad?
If you’re thinking about canceling a credit card, it’s important to know the potential benefits and risks associated with closing a credit account.
While closing a credit card can be as simple as contacting your bank and requesting that they close the card, there are a lot of variables to consider first—whether the card has an outstanding balance, whether there are alternatives to closing the credit card and whether closing the credit card will have a negative effect on your credit score.
How does closing a credit card affect credit?
Does closing a credit card affect your credit? It can, depending on how many other credit accounts you have open and whether you use those credit accounts responsibly. Knowing how your credit score works will help you reduce the impact that a closed credit card might have on your credit.
Here are the two big ways in which closing a credit card affects your credit:
Credit utilization ratio makes up 30 percent of your FICO credit score. Since your credit utilization ratio is the ratio of your current balances to your available credit, reducing the amount of credit available to you (by closing a credit card) could cause your credit utilization ratio to go up and your credit score to go down.
Closing your oldest credit card can lower the length of your credit history
This makes up 15 percent of your FICO credit score. It’s worth noting that you probably won’t see the effect on your credit score right away, since closed credit accounts still contribute to your FICO credit score until they fall off your credit report—which could be as long as 10 years from now.
How much does closing a credit card hurt your credit? It’s hard to say for sure.
If you continue to use your other credit accounts responsibly—making on-time payments every month, maintaining a low credit utilization ratio, paying off your balances regularly, etc.
—your credit score isn’t ly to suffer too much. A person with a positive credit history is ly still going to have a positive credit history even if they close one of their credit cards.
5 reasons you shouldn’t close a credit card
Is closing a credit card bad? Not necessarily, but that doesn’t mean it’s always your best option. Here are five reasons you shouldn’t close a credit card:
- Your credit score is right on the edge of the good credit range, and you don’t want to risk losing any credit score points.
- You’re planning on applying for a mortgage, and you don’t want to risk losing any credit score points.
- The credit card you’re thinking about closing is your oldest credit card, and you don’t want to risk shortening the length of your credit history.
- You have a lot of outstanding balances on your credit cards, and closing one card will reduce your available credit to the point where it has a serious negative effect on your credit utilization ratio.
- You don’t really have a good reason for closing the credit card (you just don’t use it as often as you use your other cards), and that makes you wonder whether it’s time to close the account.
5 reasons you should close a credit card
There are some very good reasons to close a credit card. Here are five reasons you might want to close a credit card:
- You are having trouble using your credit cards responsibly—maybe you’re missing payments, or maybe you’re worried about going into credit card debt that you won’t be able to pay off.
- You are separating from a partner and need to close a joint credit account.
- You have a retail credit card, but you no longer shop at that store.
- You have an airline credit card, but you no longer fly that airline—and you don’t want to pay the high annual fees associated with keeping the airline rewards card open.
- You have a premium credit card that charges an extremely high annual fee, and the card no longer makes sense with your lifestyle or spending habits.
The best way to close a credit card
If you want to close a credit card, it’s important to know the steps involved in closing a credit account. Here’s the best way to cancel a credit card:
Pay off (or transfer) your outstanding balance
If you are closing a credit card account with an outstanding balance, you need to pay off or transfer your balance first. Closing a credit card with a balance doesn’t work because you can’t fully close a credit account if you still owe money to your lender. Either pay off your debt or transfer the balance to one of today’s best balance transfer credit cards.
If you are closing a credit card with zero balance, you can skip this step—but wait at least one full statement cycle after your card has reached zero balance to ensure that you aren’t forgetting about any final charges or interest that might come due.
Use any remaining rewards
If you are closing a rewards credit card, make sure to redeem any rewards you’ve earned first; those points and miles are ly to disappear when you close the account.
In some cases, you may be able to transfer your credit card rewards to another card in the same rewards system. If you have two credit cards that earn Chase Ultimate Rewards, for example, you can transfer your Chase points from the card you’re planning to close to the card you’re planning to keep open.
Contact your credit card issuer
Once you’ve cleared out your balance and your rewards, it’s time to contact your credit card issuer. Call the number on the back of your credit card, confirm that your current credit card balance is $0 and request to cancel the account.
The customer service representative may offer you an incentive to keep the account open—a lower APR, for example, or the opportunity to earn bonus rewards. Other representatives may simply pressure you to keep the account open. You can decide whether to accept any incentives you are offered, but don’t let yourself be talked into keeping a credit card that you’d rather cancel.
Follow up with a certified letter
After you cancel your credit card with customer service, follow up your request with a certified letter to your credit card company. Restate your decision to cancel your credit account and request that they send you a letter confirming that your credit card has been canceled and that the account balance was $0 at the time of cancellation.
Check your credit reports
Once you receive the letter from your credit card issuer confirming that your account has been canceled, check your credit reports with the three major credit bureaus (Equifax, Experian and TransUnion). Confirm that your credit card is no longer listed as active, and look for the note “closed at customer request.”
Destroy the credit card
The last step in the credit card cancellation process? Destroy the credit card. This will help protect you from identity theft and credit card fraud—and it’ll also prevent you from accidentally trying to use the canceled credit card to make purchases.
Alternatives to closing a credit card
There are a few alternatives to closing a credit card, especially if you don’t want to lose the benefits of keeping the credit account open.
Swap your card
If you are unhappy with your credit card, call your credit issuer and request to swap your credit card for another card offered by the same issuer. If you have a credit card with an annual fee, for example, ask if you can downgrade your card to a no-annual-fee version. You might even be able to swap a cash back credit card for a travel rewards card (or vice versa).
Upgrade to an unsecured card
Instead of closing a secured credit card, ask your credit issuer if they can upgrade you to an unsecured (that is to say, standard) credit card.
Some credit issuers upgrade you automatically after you demonstrate responsible credit use for a specific period of time.
If your credit issuer is not able to graduate you to an unsecured card, they may be able to tell you what you can do to earn the upgrade in the future.
Keep the card for small regular payments
If you don’t want to swap, upgrade or downgrade your credit card but you aren’t sure whether you really want to close the account, here’s one option: keep the credit card open, put one small recurring charge on it every month ( a Netflix subscription) and set up automatic payments so that your statement balance always gets paid on time. This keeps your credit card active without much effort on your part—and you can switch your day-to-day spending to a credit card you better, such as one of today’s best rewards credit cards.
Is closing a credit card bad? While closing a credit card can have a negative effect on your credit score, there are pros and cons to closing a credit card—and only you can decide whether the benefits outweigh the drawbacks. If you are worried about the negative aspects of closing a credit card, consider alternatives such as swapping your credit card for another card offered by the same issuer.
Does closing a credit card hurt your credit? Closing a credit card can reduce your credit utilization ratio and/or reduce the length of your credit history, both of which could lower your credit score—but if you use your remaining credit cards responsibly, your credit history should remain positive.