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How to Cancel Your Credit Card the Right Way

Closing a credit card can hurt your credit score, so know the potential risks and benefits before you make the call.

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If your credit card doesn’t complement your financial needs anymore, you might be ready to cut ties. It’s not unusual to outgrow a credit card, but closing a credit card isn’t as simple as cutting it in half. 

Closing a credit card account will significantly impact your credit score.  However, that doesn’t mean you should keep a card with a high annual fee if you can’t afford it.

If you want to ditch your credit card, there are a few critical steps you need to take to close an account properly. We’ll walk you through how closing a card can hurt your credit, how to close your credit card account and alternatives to explore.

How canceling a credit card affects your credit

Closing a credit card can negatively affect your credit score in two ways -- by lowering the length of your credit history and increasing your credit utilization ratio -- two factors that help determine your credit score.

“Typically, immediately following closing a card, you will see your score go down, although over time, it may have a negligible impact,” said Matthew Goldman, a credit card industry expert. 

Before you close a credit card account, you should know how this move will impact your credit:

It changes the length of your credit history

The length of your credit history accounts for 15% of your credit score and includes the age of your oldest and newest cards as well as the average age of all your cards.. Having a longer credit history can help boost your score. 

“If you have three cards at 10 years, five years and one year, and close the 10-year card, your average will drop as the account age shrinks,” Goldman said. “If you close the one-year card, your average can increase. In this way, closing a very old card is not recommended due to the higher impact.”

While Goldman recommends that you hold onto your oldest card to avoid bumping down your credit score, keep in mind that a closed credit card in good standing will still stay on your credit file for 10 years, giving you some wiggle room to increase the average age of all your remaining cards. But a closed account in bad standing or with a negative history can adversely affect your credit for seven years.

It can raise your credit utilization ratio

Canceling a credit card can hurt your credit by increasing your credit utilization -- the ratio of your outstanding credit balances divided by your total credit limit. If your credit utilization percentage is high, you appear riskier to creditors and lenders: It’s a warning signal that you might be in financial hot water or have problems keeping up with your bills, so you’re resorting to plastic.

“The reason it usually goes down is that credit utilization is an important factor in most scoring models,” Goldman said. “If you close a card, your overall credit availability will decrease by the amount of that card’s limit.” So if you have $20,000 in available credit across three cards, then cancel a card with a $10,000 limit while maintaining a debt of $5,000 on the other two, your credit utilization ratio will go from 25% up to 50%.” 

Credit utilization makes up 30% of your credit score, so it’s important to keep your available credit as high as possible and your debt as low as possible to maintain a healthy credit score. A good rule of thumb is to keep your credit utilization under 30%, though most credit experts suggest trying to keep the percentage in the single digits.

When to cancel a credit card

So is it bad to close a credit card? Not necessarily. 

If you’re paying an unreasonably high annual fee on a credit card you don’t use anymore, you’ll save money by closing the account.

“If you are paying an annual fee and underutilizing the card, you should close it,” Goldman said. If the conditions of a card make it unfavorable, like if it gets a higher interest rate or you no longer travel with a co-branded card’s specific airline, closing it might be the best move. 

While it could put a dent in your score, there are a few instances when it might make sense to close a credit card:

  • The card has a high annual fee or interest rate. It might make sense to cancel a credit card if it has a high APR or high fees, such as annual fees, late payment fees, over-limit fees, overdraft fees and so on. If you don’t use a card with a costly annual fee often, or the interest rate is well above your other cards, it may be too expensive to keep in your wallet. 
  • You don’t use the card responsibly. If your balance keeps increasing and incurring interest, canceling your card might be the smartest move to avoid digging yourself into debt. (Just make sure to pay off your outstanding balance first, see below.)
  • The card doesn’t match your lifestyle anymore. You might end up saving money if you cut ties with a credit card linked to an airline you no longer travel with or a credit card with a foreign transaction fee interfering with your travels abroad. 
  • You recently separated from your partner. If you had a joint credit card account with a former spouse or partner, then closing your credit card could help keep your finances straight and avoid unwanted charges. 
  • You have outstanding debt. If you have outstanding debt that you can’t pay down or are getting on a debt management plan, you might be required to cancel your credit card accounts. While your credit score will likely take a hit, closing these accounts might help you regain your financial footing. 

How to close a credit card account the right way

If you’re ready to cancel a credit card, here’s the process you should follow: 

1. Check your credit report

Before you close your card, check your credit report for any errors. You can order a free report every 12 months from each of the three credit bureaus -- Equifax, Experian and TransUnion -- from AnnualCreditReport.com.

If you see any mistakes in your account history, such as wrongly reported late or missed payments, you can file a dispute. The credit bureau has 30 days to review and respond to your dispute.

Once you’ve closed your account, review your credit report again for errors. Common errors might include an account showing up as open and active even after you closed it or your credit report missing the “Closed by grantor” notation, which verifies that the account was closed by the creditor. 

2. Pay off or transfer your outstanding balance

To cancel your card, your balance must be paid in full. Otherwise, you’ll need to keep it open until the balance is zero or transfer the balance using a balance transfer credit card. A balance transfer card can come in handy if you want to pay off a high-interest balance by moving it to a card with an introductory 0% APR period, which generally lasts between 12 and 21 months. But make sure you have a plan to pay off your balance before the promotional period ends. Otherwise, the regular variable APR will apply to whatever balance remains on your card.

3. Redeem any existing rewards

If you have a rewards credit card, you’ll likely lose any remaining rewards you’ve earned once you close the card. Make sure you redeem your rewards before you cancel.  Depending on the card, you might be able to transfer your points to another card or cash-back rewards program. 

4. Transfer automatic payments to a new card

If you use your credit card for automatic bill payments, replace it with another method of payment to avoid possible fees or penalties. 

5. Call the credit card company 

To officially cancel, call the number on the back of your card and confirm that you no longer have a balance. Once the customer service representative verifies your account’s zero balance, you can request to close your account. Depending on the issuer’s policy, you may be able to close your account over the phone or online. The customer service representative may try to entice you with attractive offers to keep your card open, but if you want to proceed, ask for the cancellation to be completed.

6. For extra protection, send a letter of cancellation

Though not required, you can send a certified letter to the credit card issuer that documents you have canceled your card. When you’re on the phone with the customer service representative, ask them for the best address to send the letter and for the issuer to provide written confirmation that your balance is zero.

7. Safely dispose of your card

Once you’ve properly closed your account, it’s safe to get rid of the card by shredding it and making sure the sequence of numbers is unrecognizable. You can return metal credit cards back to the issuer in the mail. 

Alternatives to closing a credit card 

If you don’t want to cancel your credit card and hurt your credit score, here are a few other options to consider:

  • Negotiate a lower rate. If a high APR is the impetus for closing your account, contact the card issuer and try to negotiate a lower interest rate. You’ll have a stronger chance if your account is in good standing. 
  • Downgrade to a card with no annual fee. If you want to cancel a card due to its high annual fee, look into a card with the same issuer with no annual fee. Downgrading can help you avoid canceling the card altogether and save you money if you’re trying to dodge a costly annual fee.
  • Ask to upgrade your secured credit card: If you once used a secured credit card to build or establish credit, you might be ready to move on to a card with more perks and benefits. Some issuers upgrade you automatically after establishing a pattern of responsible credit habits. But if your issuer doesn’t offer a clear upgrade path, call the number on the back of your card and ask the representative if you’re eligible for an upgrade. 
  • Transfer the balance to a card with a 0% intro APR. To save money on interest, look into transferring the balance to a card with a 0% intro APR period. If you know you’re able to pay off the balance before the introductory rate ends and the standard rate kicks in, making the transfer could give you some breathing room to tackle your debt. Note that there’s often a balance transfer fee, which is a percentage of the amount you owe on the card, so you’ll want to do some math to see if it’s worthwhile. 
  • Keep the card open but use it sparingly. If you want to keep your card open, designate a specific use for it on occasion. To keep your account active, make a small purchase every so often and pay off the balance in full every month. Goldman recommends setting up autopay for an easy-to-monitor monthly subscription such as Netflix. That way, the card can continue to report positive payment behavior. If you don’t use your card for a long period of time, the issuer may decide to close the account. 

Should you cancel a credit card?

Canceling a credit card when it’s costing you too much money or hurting your credit score can be a smart move in the long run. However, canceling a credit card typically hurts your credit score, so if you’re going to close your account, do it in a way that minimizes the damage to your credit file. Start by weighing the pros and cons so you can make the best choice for your financial situation.

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Jackie Lam is a contributor for CNET Money. A personal finance writer for over 8 years, she covers money management, insurance, investing, banking and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives and overcome mental and emotional blocks. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming and daydreaming about stickers.
Liliana Hall is a writer for CNET Money covering banking, credit cards and mortgages. Previously, she wrote about personal credit for Bankrate and CreditCards.com. She is passionate about providing accessible content to enhance financial literacy. She graduated from the University of Texas at Austin with a bachelor's degree in journalism, and has worked in the newsrooms of KUT and the Austin Chronicle. When not working, she is probably paddle boarding, hopping on a flight or reading for her book club.
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