What Happens if I Change My Mind After Applying for a Credit Card?

A man standing in an office while holding his phone and a credit card.

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Canceling a credit card you no longer want may have consequences.

Key points

  • Canceling a credit card can ding your credit score.
  • Working with a credit card company to find an agreeable solution is generally your best option.

You see an ad for a credit card, and at first glance, it looks like a great deal. It's a prestigious card offering valuable rewards points. You like the idea of paying all your monthly expenses with the new card, racking up points, and dipping into your bank account to pay it off at the end of each month. You apply for the card before reading the small print. It's only after you learn more about the annual fee and terms and conditions that you decide it's not the right card for you. Here's what happens next, and what you can do to make the most of the situation.

Expect a credit check anyway

The credit card company has no way of knowing that you've changed your mind until you make it clear. They probably ran a credit check within minutes of receiving your application. It's worth noting that a hard credit check (like the one creditors run before approving an application) likely lowered your credit score by a few points at most. A few months of regular payments on all of your financial obligations ought to plump that score right back up.

Read more: What's the Difference Between Hard and Soft Credit Checks?

If your application is approved

Let's say you receive notification that your application has been approved and your new card is in the mail. Because you can't put the genie back in the bottle at this point, you might as well look on the bright side: Your credit score and payment history were strong enough to qualify, and that means you're on the right financial track.

But being on the right track doesn't mean you must use the card. Here's a look at your basic options.

Call the credit card company

If you're sure you don't want the card, give the company a call and explain your concerns. For example, if the annual fee is holding you back, ask them to waive it.

If they refuse, ask if you can downgrade the card to one with no fee. A high annual fee is likely tied to a card that comes with all the bells and whistles. Find out about switching over to a less enhanced card with no fee. The significant advantage of downgrading a credit card rather than canceling is that your credit score will not be impacted.

Don't activate the card

If the reason you no longer want the card is because you're afraid you'll overspend, don't activate it. Credit cards come with a sticker on them, and on that sticker is a phone number to call to activate the card. Leave that sticker in place and never make the call. That way, you can't use it. But it's worth noting that if a credit card has an annual fee, you'll still be responsible for paying that fee, whether you activate the card or not.

The potential danger of not activating the card

The annual fee typically shows up on your first bill. If you don't activate the card, there's a chance you won't see the first bill, and the fee will become a missed payment.

Payment history is the most significant factor when it comes to your FICO®

Score, and even one missed payment can hurt your score. If you decide not to activate the new credit card, make it a point to check the mail for the bill. If you signed up for electronic statements, keep an eye on your email.

Read more: The Complete Guide to Understanding Your Credit Score

The advantage of keeping the card

Even if you never plan to use the card and never activate it, the credit card company considers your account open. An open account can benefit your credit score by improving your credit utilization ratio.

Here's how it works:

  • Say you already have two open credit card accounts, each with $5,000 in available credit, giving you $10,000 in total available credit.
  • You owe $2,000 on one of the cards.
  • To figure your credit utilization ratio, a lender divides the total amount you owe ($2,000) by your total available credit ($10,000) to come up with a ratio of 20% ($2,000 ÷ $10,000 = 0.20).

Now let's say you keep the new credit card but never activate it:

  • You now have $15,000 in total available credit ($5,000 on three cards).
  • A lender divides the total amount you owe ($2,000) by your total available credit ($15,000).
  • Your credit utilization rate drops to 13% ($2,000 ÷ $15,000 = 0.13).

Credit utilization ratio matters because creditors feel safer lending you money when they see how you manage the funds already available to you. The general rule is to keep credit utilization below 30%, although the lower, the better.

One thing to keep in mind: If you never activate and use the card, the credit card company is likely to cancel it at some point. It costs a credit card company money to keep accounts open, and never-used accounts are considered dead weight. If your card is canceled, your credit score may take the hit.

Cancel the credit card

If all else fails and you can't find a way to make the card work for you, you can cancel it. Before you do, though, be aware of these possible outcomes of canceling the card:

  • You'll have less available credit. Anytime you take on new debt, your credit utilization ratio is higher.
  • Your "credit mix" may be impacted. Typically, lenders want to know that you can manage many types of credit. If you're canceling your only credit card, it could ding your credit score.
  • Canceling too quickly can raise a red flag for lenders. Even if it doesn't impact your credit score, lenders may wonder if you're an impulsive borrower or if financial trouble led to the cancellation.

If you're sure you want to cancel the credit card, do it before the end of the first billing cycle. It's possible the credit card company won't report the cancellation to the credit bureau if it's cancelled early enough. But if the card carries an annual fee, you may still be on the hook for paying it whether the card is canceled or not.

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