Closing a credit card may sound like a smart move, especially if you’re not using it or you’re trying to simplify your finances. But in many cases, canceling a credit card can actually hurt your credit more than it helps. That’s why it’s important to understand how credit cards affect your credit score, and when closing one makes sense, or when it doesn’t.
This guide will help you decide when it’s okay to close a card, what the risks are, and how to protect your credit score if you do.
It can. When you close a credit card, you’re reducing your total available credit. This affects your credit utilization ratio: the amount of credit you’re using compared to your total limit. If you carry balances on other cards, your utilization rate could increase after canceling, which may negatively impact your credit score.
Also, if the card you cancel is your oldest account, you’ll shorten your account age, another key part of your credit history.
Every credit card issuer reports your activity to your credit report. Lenders look at these accounts to see how responsible you are with your borrowing. They review how long your accounts have been open, your credit limits, payment history, and whether you carry balances.
Closing an account with the credit card issuer stops new data from being reported. It also reduces your credit mix, which reflects the variety of credit types you’re managing. All of these factors together determine how a closed account affects your overall credit profile.
There are valid reasons to cancel a card. Consider doing it if:
Before you cancel, ask your card issuer if they offer a no fee version of your card. This way, you can avoid closing the account and preserve your credit history.
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One of the most common reasons people cancel cards is the annual fee. If the fee is high and you’re not getting enough rewards or perks to make it worthwhile, canceling might be the right move. However, if it’s an old card, the credit history tied to that account may be more valuable than the savings.
In that case, consider downgrading to a no-fee version to avoid hurting your credit score. Learn more from Experian about annual fees.
If you’ve decided that canceling a credit card is the best choice, don’t rush. There are several steps to take to avoid potential credit score impacts and protect your credit standing:
1. Pay Off the Balance: Make sure the card has a zero balance. Some issuers won’t allow you to close an account until it’s fully paid.
2. Redeem Rewards: Many credit card rewards programs don’t let you use points or miles after the account is closed. If you don’t redeem them first, you could lose them.
3. Switch Automatic Payments: If you have recurring expenses or automated payments tied to the card, move them to a different payment method. Forgetting this step could lead to missed payments and balance issues.
4. Download Your Statements: After the account is closed, you might lose online access. Save your records now for tax or dispute purposes.
5. Contact the Card Issuer: Call the customer service number and ask for confirmation that the account is fully paid and can be closed. Ask how it will appear on your credit report, ideally as “closed by consumer.”
6. Follow Up: After a few weeks, check that your account was updated correctly with the credit bureaus.
If you’re worried about the impact on your credit score, consider these options:
Ask if the credit card company can switch you to a different card with no annual fee.
Make a small charge every few months—like gas or a streaming subscription—and pay it off immediately.
Set up auto-pay for a small recurring bill to keep the card active without extra effort.
These strategies help maintain your account age, available credit, and credit mix without the downsides of cancellation.
Credit utilization makes up about 30% of your credit score. If you have $10,000 in total limits and carry a $3,000 balance, your utilization is 30%. But if you cancel a card with a $5,000 limit, your utilization jumps to 60%, even if your balance doesn’t change.
That’s why even closing a credit account with a zero balance can cause a sudden drop in your credit score.
Sometimes. If the card is tempting you to overspend or comes with high annual fees that don’t make sense for your lifestyle, canceling it can improve your financial health.
That said, if you’re planning to apply for a new credit card, auto loan, or mortgage soon, wait. Even a small dip in your score from a closed account can affect your loan terms.
Many people believe that closing a credit card will instantly boost their credit score, but that’s rarely the case. Let’s clear up a few common misunderstandings:
· Myth: Closing a card erases the debt.
Truth: You still owe any remaining balance. The account must be paid off before it’s officially closed.
· Myth: Canceling unused cards improves your score.
Truth: An unused card helps your overall credit utilization ratio and total credit available, which are both good for your score.
· Myth: One closed account won’t affect my score.
Truth: Depending on the card’s limit, age, and balance, one account can significantly change your credit score and report.
When you close a credit card, the account stays on your credit report for up to 10 years. But it no longer contributes to your credit history or account age moving forward. That means its positive impact fades over time.
If your types of credit used become less diverse or your total available credit shrinks, you may see a longer-term drop in your score, even if you’ve made all your payments on time.
It’s rarely a good idea. Your oldest credit account plays a major role in your credit history. Closing it could shorten your average account age, especially if your remaining cards are newer.
If you’re paying a high annual fee, talk to the issuer. Many will let you switch to a no-fee version that still keeps the original open date and history intact.
For government-backed insights, check out the Consumer Financial Protection Bureau’s guide on how canceling a credit card affects your credit score.
In most cases, it's a good idea to keep credit accounts open, especially if they help your credit utilization ratio or credit history. However, there are situations where you’ll be required to close your accounts. One of these is when you enter a Debt Management Plan (DMP) through a nonprofit credit counseling agency like Credit.org. As part of a DMP, your credit accounts are typically closed to prevent new charges and ensure full repayment through structured monthly payments.
This might temporarily lower your credit score, but the long-term benefits of consistent, on-time payments and reduced interest rates often outweigh the short-term impact. Plus, by closing your cards under guidance from a certified credit counselor, you gain support, structure, and a clear payoff timeline.
If you’re still unsure about whether to close a card or how it might affect your score, speak with a financial expert. A certified credit counselor can walk you through your situation and offer specific advice.
You can start by visiting Credit.org, a nonprofit resource for financial education and free counseling.
