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Whether it’s your very first credit card that you want to get rid of, a card that you no longer use or you’ve since opened other cards with better rewards and lower interest rates, canceling your credit cards isn’t the best solution. Contrary to what most consumers believe, canceling a credit card can have some major impacts on your credit health, making it harder to get approved for new credit cards or other lines of credit in the future, such as personal loans and mortgages. If you’re considering canceling any of your cards, keep reading to find out why that isn’t the best option, and what you should consider doing instead.

Why should I avoid canceling my credit cards?

Although you may think you’re making some positive changes by canceling a credit card, you’re actually doing more harm than good. Here are some of the negative impacts you can expect if you cancel a credit card.

That card will not immediately disappear from your reports

Many people are under the impression that closing a credit card will automatically clear that card’s account history from their credit reports, but that’s not how it works. In fact, the payment history associated with the card you cancel will still be accounted for on your credit reports and it won’t come off your right away, as it usually takes seven to 10 years for this information to fall off your credit reports, depending on your payment history. So while you may think canceling your credit card is a good way to cover or hide a history of missing payments, it won’t solve your problems — the best way to rid this negative item from your credit reports is to work with the issuer (or the collection agency) to settle the debt.

Your credit scores will be affected

You may or may not know that, according to FICO, there are five things that make up your credit scores: payment history (35%), how much you owe (30%), length of your credit history (15%), the variety of credit you have open (10%) and how many accounts are new (10%). When you close a credit card, there are two areas that will likely be impacted, including length of credit history and the variety of credit you hold — making up 25% of your credit scores. Additionally, if you only have one credit card and you close it or cancel it, you’re left with less credit history (and no current credit), which could, in turn, reflect in negative marks on your credit reports as well as affect your ability to be approved for credit cards, loans or other credit accounts in the future.

Your credit utilization ratio may increase

cancelling your credit cardsYour credit card utilization ratio compares the amount of credit being used to the total amount of credit available to you as the borrower. Essentially, it’s your balance-to-limit ratio, or the percentage of the credit you’ve used across all your credit card accounts. You can calculate it by dividing the total of your credit card balances by your total credit limits. For example, if you had two credit cards — one carrying a balance of $200 with a credit limit of $1,000 and another with a balance of $500 with a credit limit of $2,500 — you’d add the balances of both cards ($700), then divide that amount by the total credit limits ($3,500) to get the credit utilization of 20%. It should be noted that creditors prefer to see your credit utilization around 30% or less.

When you cancel a credit card, you could severely increase your credit utilization because you’re reducing your available credit limit, which also impacts the how much you owe (30%) aspect of your credit scores. Even if you open a new credit card, you credit utilization and credit scores could still be jeopardizing because the new card’s credit line may be lower than the older card’s limit. Since your credit utilization tells lenders how much of your available credit you’re using, you’re essentially wasting that line of credit by closing out of your credit card.

You could lose any rewards you’ve earned on that credit card

Many people apply for credit cards that offer them rewards on their purchases, whether it’s cash back at the grocery store or travel rewards to use toward future flights or hotel accommodations. Oftentimes, credit card issuers have a minimum amount for redeeming these types of rewards, like the Blue Cash Preferred Card from American Express (a NextAdvisor advertiser) that allows you to redeem your rewards when your total available rewards reach $25. Canceling your credit card without considering or redeeming your rewards could cause you to lose all of them. Instead, you may want to continue to use the card until you have enough rewards to redeem — one of the best way to responsibly build rewards is to use your credit card for everyday purchases. It should be noted that if you’re not earning top-notch rewards with your credit card, you may not worry about losing them, but this is still something that’s important to take this into account before deciding on whether you should cancel your credit card or not.

What should I do instead?

Whether you’re frustrated with your interest rate or you just paid off the balance and are afraid you’ll rack up some more debt, there are some options for you.

Talk to your credit card issuer

Canceling because of the high interest rates or annual fees? Try calling your lender to see if you can negotiate before you cancel, as you may qualify for a lower rate or waived annual fee. Although credit card issuers aren’t required to accept your requests, many would prefer to keep their old customers than to try to find new ones. So it never hurts to ask about lowering your APR or fees associated with a particular credit card.

Keep the card open and use it occasionally

Almost as detrimental to your credit as canceling a credit card is to stop using it altogether. If you want to help keep your credit in good standing, don’t stop using your credit card, even if you begin to use other credit cards. The main risk you take from not using your credit card is your account becoming inactive. Even though this doesn’t seem like a big deal, an inactive credit card can automatically cause your rewards to expire, like the Citi Double Cash Card holders will experience after there are no purchases or payments on the card for 12 months. In addition, you run the risk of the lender canceling the card for you because of inactivity, which will not only impact everything detailed above, but also look not-so-great to future lenders. That’s why it’s important to still use your credit card, even if it’s just once every other month. If you’re trying to avoid using a particular card because it has high interest rates or you worry about going into debt, schedule recurring monthly bill that you already budgeted for, such as your monthly cell phone bill or any other bill that you know you can afford to make on-time payments to, then pay the balance off every month. This will help ensure that the card remains active, and that the lender is continuing to report your positive payment history to the credit bureaus. If you’re using a rewards credit card, you’ll also continue to earn rewards on the card.

If you still think canceling is your best option …

While this may seem obvious, cutting your credit cards in half doesn’t mean they’re automatically canceled. Just because you physically cut your credit card up and no longer use it, does not mean that that card is in anyway inactive. If you really want to cancel your credit cards, you’ll need to contact the card issuer by calling the number on the back of your card or listed on your credit card statement. Something you may want to think about if you opt to cancel the card is opening a new line of credit, regardless of whether it’s a new credit card, loan or any other type of credit. Although this isn’t an instant fix to your credit, it could help your scores from taking a major beating, as it can give you a good mix of credit types or maintain a lower credit utilization.

Have more questions about credit cards and how they impact your financial health? Follow our credit cards blog to learn more. And if you’re in the market for a new credit card that offers rewards, has a long 0% intro APR or helps you rebuild your credit, check out our credit card reviews to see the top options on the market.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.