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Ready to cancel a credit card? Don't get out the scissors yet! There are a few important steps to take to ensure closing your card doesn't drag down your credit score. Whether you're sick of paying an annual fee or want to spring clean your wallet, here's everything you need to know about how to cancel a credit card.
Canceling a credit card boils down to closing your account online or calling your card issuer and canceling over the phone. But before you close that card, however, it's important to follow some steps to ensure you prevent or minimize damage to your credit score:
Yes, canceling a credit card can hurt your credit score. To be sure, credit reporting bureaus don't care that the card itself is canceled. Rather, it's the side effects of canceling the card that can affect your score, such as increasing your credit utilization ratio or reducing the average age of your credit history.
Credit utilization measures how much total credit you have against how much credit you're using. Since it makes up 30% of your FICO® Score, it plays a commanding role in the calculation of your credit score. Canceling a credit card affects your credit utilization by lowering how much credit you have and increasing the percentage of how much you're using.
For example, let's imagine your credit card balances add up to $5,000 and all of your credit limits add up to $20,000. Your credit utilization rate is your balances ($5,000) divided by your limits ($20,000), or 25%.
Now let's say you close a credit card with a $10,000 limit. When you close that card, your overall credit limit drops from $20,000 to $10,000. Your credit utilization is still your balances ($5,000) divided by your limits ($10,000), but now your credit utilization ratio shoots up to 50%. The higher utilization ratio will likely damage your score until those balances are paid down.
You can calculate your credit utilization rate by adding up how much you owe across all of your credit cards, then dividing that by your total credit limit across all credit cards. Ideally, it's good to keep your credit utilization below 30%.
The average age of all your credit accounts and the age of your oldest account together make up about 15% of your FICO® Score. If you're closing an old credit card -- or a recent one but your credit history is young -- you might impact your credit score by canceling it. How much impact will depend on your credit history, but it could be as insignificant as a few points or as gut-wrenching as a double digit drop.
It's not necessarily bad to close a credit card account. While closing a credit card can hurt your credit score, sometimes it's the right choice. Below are some good reasons you might want to cancel your credit card.
In general, if canceling a credit card doesn't improve your personal finances in some capacity, you may want to think twice before canceling it. While it's ultimately your choice whether to cancel, here are a few commonly stated reasons that might warrant some more thought.
If you overspend, consider... | Leaving the card at home so you have it for emergencies. You can consider (literally!) freezing the card in a block of ice so you can't use it impulsively, or asking a family member to hide it in a safe place. |
If it has an annual fee, consider... | Downgrading to a no-annual-fee version. This will leave your credit history intact while you avoid paying fees for a card you don't use. |
If it has a high interest rate, consider... | Asking your credit card issuer for a lower interest rate, or doing a balance transfer to a card with a lower interest rate. |
If it doesn't match your spending habits, consider... | Leaving it open if it doesn't have an annual fee, and opening another credit card that fits your spending habits better. |
If you rarely use it, consider... | Leaving it open if it doesn't have an annual fee, and putting one or two small, recurring bills on it so it doesn't get closed for inactivity. |
If you want better rewards, consider... | Asking about a product change. You might be able to swap out the card for a different one that offers rewards more suited to your spending habits, and you won't lose your account history. |
While closing a credit card can hurt your credit score, sometimes it's the right choice. If you do close a credit card, you can help your credit score by opening a new card that better suits your needs or requesting a credit limit increase with one of your current cards. These will help keep your credit utilization low and protect your score. Knowing how to cancel a credit card properly will help you minimize negative impact on your credit.
Here are some other questions we've answered:
We recommend comparing options to ensure the card you're selecting is the best fit for you. To make your search easier, here's a short list of standout credit cards.
Offer | Our Rating | Welcome Offer | Rewards Program | APR | Learn More |
---|---|---|---|---|---|
Apply Now for Bank of America® Unlimited Cash Rewards credit card
On Bank of America's Secure Website. |
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
$200 cash rewards $200 online cash rewards bonus after you make at least $1,000 in purchases in the first 90 days of account opening | 1.5% cash back |
Intro: 0% Intro APR for 15 billing cycles for purchases. 0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days. After the intro APR offer ends, 18.24% - 28.24% Variable APR on purchases and balance transfers will apply. Balance transfers include a fee of 3% for 60 days from account opening, then 4%. Purchases: 0% Intro APR for 15 billing cycles for purchases Balance Transfers: 0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days Regular: 18.24% - 28.24% (Variable) |
Apply Now for Bank of America® Unlimited Cash Rewards credit card
On Bank of America's Secure Website. |
Apply Now for Chase Sapphire Preferred® Card
On Chase's Secure Website. |
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
60,000 bonus points Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Travel℠. | 5x on travel purchased through Chase Travel℠, 3x on dining and 2x on all other travel purchases Enjoy benefits such as 5x on travel purchased through Chase Travel℠, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases, $50 Annual Chase Travel Hotel Credit, plus more. |
Intro: N/A Purchases: N/A Balance Transfers: N/A Regular: 21.49%-28.49% Variable |
Apply Now for Chase Sapphire Preferred® Card
On Chase's Secure Website. |
Rating image, 5.00 out of 5 stars.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Discover will match all the cash back you’ve earned at the end of your first year. N/A | 1% - 5% Cashback Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases—automatically. |
Intro: Purchases: 0%, 15 months Balance Transfers: 0%, 15 months Regular: 17.24% - 28.24% Variable APR |
Yes, it's totally possible to cancel a credit card with little or no damage to your credit score. If your credit utilization is low or near zero, for instance, canceling a card may not have a major effect. Likewise, if the card was recently opened, it might not hurt your credit history's average age.
No, it's not bad to close a credit card. In fact, it might help your personal finances to cancel one, especially if you're prone to carrying credit card debt.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.