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When you have a credit card that you’re no longer using, it makes sense that your first instinct would be to cancel it. After all, we cancel things we’re not using anymore all the time. However, with credit cards the decision to cancel comes with a bit more weight, as canceling a card can come with some serious consequences. There are definitely instances when it’s a good decision to cancel your credit card, such as when you want to get rid of a card with an annual fee, but there are a lot of other situations when you should seriously consider another option. Read on to find out the effects of canceling a credit card, alternatives to canceling and situations where your credit card provider may close your account forcibly.

The effects of canceling a credit card

While credit card issuers generally don’t charge penalties for closing a credit account, canceling does come with a few side effects that are mostly negative. Be sure to keep these factors in mind before making your decision.

Shifts in credit scores

Your credit scores are calculated using various bits of your credit data, such as your payment history and the number of new credit accounts you have. When you cancel a credit card, that changes some pieces of your credit data, which in turn has an effect on your credit scores. Using the FICO score as an example, closing a credit card could impact three areas that FICO uses to determine your credit scores: your amounts owed (which makes up 30% of your score), your length of credit history (15%) and your types of credit (10%). Not only could canceling a credit card reduce the average age of your credit account and the variety of credit you have, but it may also raise your credit utilization ratio. This ratio compares the amount of debt you’re carrying to the total amount of credit you have available, and it’s a key component of your amounts owed, so you want to keep it as low as possible.

Activity sticks on credit reports

Though closing a credit account can damage your average length of credit history, that history doesn’t just vanish from your credit reports. Even if you cancel your credit card, the credit events associated with that card will remain on your reports for a long time, typically between seven and 10 years after you first acquired them. This can actually be a good thing if you have a history of paying your credit card bills on time, but if you have derogatory items such as past-due payments or defaults, be aware that they’ll be haunting you for quite a while. The most important take-away from this is that canceling a card to hide some credit mistakes won’t work, and if you want to clean up your credit reports, you’re better off paying any outstanding debts you have and striving to build a positive credit history going forward.

Rewards get wiped

If you’re closing a credit card that earns rewards, you’ll want to make sure you redeem as many of those rewards as possible before canceling. In most cases, credit cards will lose their entire rewards balance once they’re cancelled, and if you accidentally close a card before using the rewards, it’s usually not possible to recover them. While it’s often pretty easy to redeem your remaining rewards, some credit cards put a minimum on your redemption amount, such as the Citi Double Cash Card (a NextAdvisor advertiser), which requires you to have at least $25 of cash back before you redeem your rewards. If you don’t have enough rewards, you’ll have to either keep using the card until you meet the minimum or just accept the loss.

Alternatives to canceling your card

Cancellation is not the only solution to credit card issues, and in many cases, cancelling a card will do more harm than good. If you have a problem with a credit card, it couldn’t hurt to try negotiating with your card provider before closing your credit account. Some card providers are open to lowering interest rates or waiving fees if you ask them, though keep in mind this approach doesn’t always work. For credit cards that you don’t need anymore, it’s actually a good idea to keep the card open to preserve your credit scores. Just use the card once a month or set a recurring expense (like a monthly subscription) on it so the card stays active. It can also be a good security idea to enable spending alerts for the card using your online account, so you’ll get an email or text message every time someone makes a purchase with it. That way, if a criminal somehow steals your card number, you can catch any fraud they commit quickly without regularly monitoring your balance or statement. Keep in mind that we still suggest regular monitoring of your statement or the account’s activity via your online account, as that’s the easiest way to spot potential fraud and stay in the know with your account.

Forced cancellation

You aren’t the only person who can close your credit accounts. According to the 2012 lawsuit Dieffenbach v. RBS Citizens, N.A., your credit card issuers can also terminate your accounts at any time for pretty much any reason. There are a number of obvious reasons why a credit card provider may cancel your card, including inactivity, being over 90 days late on paying your bill and discontinuing the model of credit card you have, but card providers also sometimes have internal cancellation standards that they don’t explicitly disclose to the public. For example, some Chase cardholders recently found their accounts suddenly shuttered, and the pattern of closures pointed to Chase cracking down on people who were serious about maximizing their credit card rewards, carrying at least six active Chase cards and charging hundreds of thousands of dollars per year in purchases to them. If you use your card for everyday spending, pay your bill on time and use your card responsibly, you likely don’t have to worry about a forced cancellation, but know that it can happen.

Keeping your older cards open may require a little more effort on your part, but it can seriously benefit your credit in the long run. For more insight into the world of credit, follow our credit cards blog.

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.