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Published: Mar 19, 2024 9 min read

Canceling a credit card that you no longer use is typically a straightforward process. However, the steps you need to take and the prerequisites often vary between lenders. Additionally, it’s important to consider how canceling your credit card may affect your credit score.

Keep reading to find out more about how to close a credit card account, reasons why canceling may be a good idea and how it will impact your credit.

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Does canceling a credit card hurt your credit?

Closing a credit card account may affect your credit score. However, the extent of the impact depends on your credit history and the amount of debt you have.

Credit utilization ratio

Before closing a card, consider how your credit utilization ratio (how much of your available credit you're using) will change. Canceling a card can decrease your available credit and raise your credit utilization ratio, which can potentially lower your score.

To calculate your credit utilization ratio, divide your outstanding debt by your total available credit. For example, say you have $5,000 in credit card debt and an overall credit limit of $25,000 across all your cards. If you were to close a card with a $9,000 limit, your total available credit would drop from $25,000 to $16,000. And if you still owe $5,000 on your cards, your credit utilization would rise to around 31%.

Note that experts recommend having a ratio below 30% — and 10% or less is even more favorable.

Length of credit history

The length of your credit history is based on how long your credit accounts have been open, including the average age of all your accounts and the age of your oldest one. This factor impacts your FICO credit score, as lenders prefer borrowers with longer track records to better assess their creditworthiness.

Closing an account, particularly one of your oldest ones, can reduce the length of your credit history. Most financial experts recommend keeping older credit cards open,using them sporadically and paying them off in full at the end of the month.

Should I cancel my credit card?

The following are some reasons why canceling a credit card may be in your best interest:

High annual fees

If you have a credit card with a high annual fee, you should consider whether the card’s rewards and benefits outweigh its cost.

For example, it may not be worth keeping a travel credit card with a $500 annual fee if you’re not using it enough to take full advantage of its rewards. In this case, you’re paying an annual fee that’s likely higher than the money you’re saving from the rewards, so canceling the card may be your best option.

However, if you’re not taking advantage of your annual-fee credit card, you may also consider requesting a downgrade to a low or no-annual-fee card.

You’re spending too much

Credit card debt can accumulate quickly if using your card but not paying your monthly bill in full. You could end up paying hundreds or thousands more in interest charges and could spend years settling the outstanding balance.

Additionally, carrying too much debt can increase your credit utilization rate and consequently lower your credit score. It can also make it harder to keep up with monthly payments, which is the most important credit scoring factor.

You’re getting a divorce

If you are getting a divorce, it’s a good idea to cancel joint credit cards — or, if you’re the primary cardholder, remove your former partner as an authorized user. Keeping the account open makes you legally liable for any charges your former spouse makes. Also, if your ex makes late payments, it will negatively impact your credit score.

How to cancel a credit card

If you determine that closing your credit card is the best option for your financial situation, these are the steps you should take:

Pay remaining balances

Find out if your credit card issuer requires that you pay the outstanding balance in full before canceling the card. In most cases, you’ll need to pay your credit card before closing it. However, even if your issuer were to let you close an unsettled account, you’ll still be legally liable for the bill and it’ll continue accruing interest charges until it’s paid.

Even if it’s not required, having a zero balance before you close a credit card is better for your credit score as it lowers your credit utilization ratio.

Stop recurring subscription payments

Remember to cancel any automatic payments from streaming services or utility bills, for example, that are charged to your soon-to-be-canceled credit card. If you’d like to keep the subscriptions active, update your payment information by adding a new card to avoid interruptions or possible penalty charges.

Redeem any remaining rewards and cash back

Make sure to redeem any accumulated miles, points or cash back. Depending on your card’s rewards program, you may end up losing unused rewards after closing your card.

If your card earned cash back and it has an outstanding balance, consider redeeming it as a statement credit to help you pay it off. You can also transfer the cash to a bank account.

However, keep in mind that if your card earned travel rewards, those may lose some of their value unless redeemed for travel.

Contact the credit card company

The quickest way to cancel your credit card is by calling the company. You can often find a customer support number on the back of your card. However, you may also be able to close your account through your online account.

Expect a letter confirming the cancellation of your card. Keep it for future reference in case the account continues to be reported as open on your credit report.

Destroy the card

Once you’ve successfully canceled your card, cut it in half or shred it before throwing it away. Your card may remain active for several days after your request the cancellation, so destroying it prevents someone from using it to make unauthorized purchases.

Review your credit report

Closed credit cards can remain on your credit report for up to seven years. However, you should review your report about a month after requesting the cancellation to make sure your issuer reported it and you don’t have an outstanding balance.

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How to Cancel a Credit Card FAQs

Should you keep or cancel your cards?

Your decision to keep or cancel a card depends on your financial circumstances and preferences. It may be wise to close your credit card if you’re overspending or or don’t want to pay expensive annual fees, for example. But keeping your card could be worthwhile if you benefit from its rewards and perks.

What happens when you cancel a credit card?

Canceling your credit card will reduce your total available credit limit, which can raise your credit utilization ratio and lower your credit score. It can also reduce the length of your credit history, another credit scoring factor. However, your score can quickly recover if you keep making on-time payments.

How long does it take for a credit card to close due to inactivity?

A credit card issuer may decide to close your credit card account if you haven’t used it in about a year or more.

Should I close my credit card if I have a high interest rate?

Closing a credit card with a high-interest rate can be wise if you use it regularly and don’t settle your balance every month. However, this can impact your credit score, so consider paying your total balance each month if you can afford it. Other options to explore include transferring your debt to a balance transfer credit card or negotiating a lower interest rate with the issuer.

Summary of Money’s How to Cancel a Credit Card

Whether you should cancel a credit card or not depends on your financial situation and goals. Keeping a card, even if you don't use it frequently, is often wise since it helps increase your available credit, which can help your credit score. On the other hand, if you're spending too much and having a hard time paying your monthly bills, canceling it may be in your best interest.

With this in mind, it’s important to consider how canceling a card will impact your credit utilization ratio and the length of your credit history, two important credit scoring factors. And if the card has an annual fee, consider whether you’re using it enough to reap the rewards and benefits it offers.

If you decide to cancel a card, settle your outstanding balance and redeem any accumulated rewards since you may lose them. Also, review your credit report at least month after the cancellation to make sure your issuer reported it to the main credit bureaus.

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