cancel your credit card

Updated: November 18, 2019

If you find yourself no longer using a credit card, your first instinct may be to cancel it. But if you do, a few things could happen — your credit utilization may increase while your available credit and the average age of your accounts may decrease, in turn hurting your credit score.

Even when canceling feels like the surefire decision, don’t act too fast. When it comes to deciding what to do with an unused credit card, the best solution will depend on your situation.

Do you need to cancel your credit card?

There are instances when canceling your credit card may be the best option — maybe you want to get rid of a card with an annual fee or avoid excess spending — but most situations require some caution before proceeding. 

Keeping your account open is simple and easy as long as you don’t let it become inactive. It’ll take a few payments per year, but maintaining an active account and not canceling the card could be a savior for your credit score. One easy way to do this is to pay a monthly bill with your card, such as a cell phone bill.

However, certain scenarios may call for a cancellation. If your card is charging a substantial annual fee, it might be time to cut ties to save you some money. Another reason to do away with a credit card is if the convenience causes excess spending. If your spending habits start to spiral out of control, cancel your card (after paying it off) to save yourself from financial turmoil. 

In the majority of cases, canceling your card isn’t the best idea. A balance-free line of credit is a boost to your credit score and may be useful in an emergency, but there’s more to consider if you’re still curious to cancel. 

Why do you want to cancel your card?

Often times some mistakenly think that being in debt is a reason to cancel your credit card. Realistically, this isn’t a good solution unless you have a spending problem.

If you have outstanding credit card debt, you may benefit from the acquisition of a balance transfer card. Cards like the Citi Simplicity® Card or Chase Freedom Unlimited offer long introductory APR periods, allowing you to transfer credit card debt into one account and carry a month-to-month balance without paying interest. Debt is much easier to manage when organized, so executing a balance transfer might be the answer to your debt payoff

Another reason some cardholders look to cancel a card after they’ve applied is because they’ve been approved for a better option. It makes sense that this thought process is the immediate reaction, but keeping the account open is likely the best solution. Plus, any rewards accumulated on the card will be wiped when canceling. 

If keeping an account active seems wrong because your card has an annual fee or high interest rate, contact your card issuer to see if you can negotiate a lower interest rate before canceling. You may strike a deal and be able to make the necessary recurring payments at an affordable price.

What will be the impact on your credit score?

The decision to cancel your card can cause a decrease in your score in a few ways. For example, closing a credit card could impact three areas used to determine your FICO score: amounts owed (which makes up 30% of your score), length of credit history (15%) and types of credit (10%). Canceling your card can instantly decrease your credit mix and the amount of available credit you have, in addition to shortening the average age of your credit accounts. Ultimately, these factors may hurt your credit score.

Canceling a credit card may also raise your credit utilization ratio, which is the amount of debt you’re carrying compared to the total credit you have available. It’s a key component of your creditworthiness, so the lower the credit utilization ratio, the better. If you do elect to go through with a cancellation, you may want to take out a personal loan or open a new card account to keep a diverse mix of credit and increase your available balance.

Though closing a credit account can damage your average length of credit history, that history doesn’t just vanish from your credit report. Even when canceling a card, the events associated with that card will remain on your reports for a long time, typically between seven to 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 may linger for a while. 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.

Steps to cancel your card

If you still think canceling your card is the best option, cutting a card in half won’t solve your problems. However, there are steps you can take to correctly complete the process:

  1. Consider the impact on your credit score to be sure it won’t be a major financial mishap.
  2. Redeem any rewards you may have earned using your card.
  3. Contact your card issuer to cancel by calling the number on the back of your card or on your credit card statement.
  4. Check for confirmation from your bank that your card has been canceled to ensure you don’t unknowingly miss payments.
  5. Look into opening a new line of credit, regardless of whether it’s a new credit card, loan or something else.

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.