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How to Cancel Your Credit Card the Right Way

Learn how to cancel your credit card without damaging your credit score.

Sarah Tew // CNET

There may come a time when you outgrow a credit card, and keeping it around feels risky. Often, your financial situation changes, and it doesn’t make sense to pay a high annual fee or use a card with rewards categories that no longer match your lifestyle. In some cases, breaking up with a card makes sense -- but there are drawbacks to consider first.  

Contrary to what TV sitcoms might have taught you, canceling a credit card involves more than just cutting the physical card in half and tossing it in the trash. There are steps you can take to ensure your account is closed and to adequately address any remaining balance or rewards. 

If you want to cancel a credit card, there are various factors to keep in mind, including how it could hurt your credit score by impacting your length of credit history and credit utilization rate. We’ll walk you through how to know if canceling your credit card is the right option and how to do it without wrecking your credit.

Here’s why canceling a credit card usually hurts your credit score

Closing your credit card accounts usually dings your credit by changing your length of credit history and credit utilization rate -- two factors that help determine your credit score.

Your length of credit history makes up 15% of your credit score, and it includes the age of your oldest credit account, your newest account, as well as the average age of all your credit accounts. A longer credit history can boost your score. 

Closing your oldest card will eventually shorten your credit history average and could bump down your score. But the impact won’t happen right away. Typically, a closed credit card in good standing will stay on your credit file for ten years, so your length of credit won’t be affected until it drops off.

Your credit utilization, the amount of credit you have access to versus the amount of credit you’ve used, makes up 30% of your credit score. To find your credit utilization rate, you’ll add the balances on all your credit accounts, then divide this number by your total credit limit. 

For example, let’s say you carry a balance of $500 across all cards, and the total limit on all your cards is $5,000. Your credit utilization rate would be 10% ($500 divided by $5,000). If you close a card with a $1,500 credit limit and $0 balance, your credit utilization rate will rise to 14% ($500 divided by $3,500). 

The higher your credit utilization, the riskier you seem to creditors and lenders. That’s because it might be a warning signal that you’re in financial hot water or having problems keeping up with your bills, so you’re bridging the gap with credit. Ideally, lenders like to see a credit utilization rate under 30%. 

When closing a credit card makes sense

So is it bad to close a credit card? Not necessarily. While it could put a slight dent in your score, there are a few instances when it might make sense to do so:

  • The card has a high annual percentage rate. If you’re running a high balance and can only make the minimum payment on your card, it might make sense to close the card, especially if your APR is high, to avoid accruing further interest. However, to close your card, you will have to pay off the remaining balance first. 
  • The card carries high fees. It might make sense to cancel a credit card if there are high fees, such as late payment fees, annual fees or foreign transaction fees.
  • You’re frequently overspending. If you’re worried about spending beyond your budget, canceling your card can help you avoid digging yourself into debt.
  • You’re newly divorced or separated. If you have a joint credit card with a spouse or significant other and are going through a breakup, you should close any joint credit cards to help keep your finances in order. 
  • You have outstanding debt. If you’re struggling to repay your credit card balances or are getting on a debt management plan that requires you to cancel your credit card accounts, you may be required to cancel one or more credit cards. While your credit will likely take a hit in the short term, closing these accounts to focus on other debt payments could set you up for long-term success. 

If you can resist temptation and avoid touching your credit card entirely, you could keep your card open while focusing on other debt or making headway paying off outstanding balances

How to close a credit card the right way

If you decide to cancel a credit card, there’s a process you should follow. 

1. Check your credit report

Before closing your card, check your credit report and look for errors. You can order a free report every 12 months from each of the three credit bureaus -- Equifax, Experian and TransUnion -- from (During the COVID-19 pandemic, the three bureaus offered a free weekly credit report. As of Mar. 8, 2023, this offer is still in effect, so you should be able to receive a free copy from each bureau, even if you’ve already requested one this year.)

If you see any mistakes, such as payments incorrectly reported as late or as missed, or payments being reported to the wrong account, you can file a dispute online with any of the credit bureaus showing this discrepancy. The credit bureau has 30 days to review and respond to your dispute.

2. Pay off your balance

To cancel your card, your balance must be paid in full. Otherwise, you must keep it open until the balance is zero.

3. Redeem any existing rewards

Any rewards you earned while using your card usually vanish once you close a card. Depending on the card, you might be able to transfer your points to another card or cash-back rewards program. Be sure to cash in these rewards before you cancel. 

4. Call the credit card company

To officially cancel, call the number on the back of your card. This will connect you with the credit card company or bank that issued the card. The customer service representative may try to entice you with attractive offers to keep your card open. Stay strong, and remember your reasons for closing your account.

5. For extra protection, send a letter of cancellation

While this isn’t required, send a certified letter to the credit card issuer that you have canceled your card. When you’re on the phone with the customer service rep, ask them for the best address to send such a letter. You should also ask the issuer to confirm your account has been paid in full.

6. Safely dispose of your card

Once you’ve properly closed your account, it’s safe to get rid of the card. Shred your card and make sure the sequence of numbers is unrecognizable. 

After you’ve closed your account, it’s a good idea to review your credit again and watch for errors. Common errors that could pop up after you’ve canceled a card include an account showing as open and active even after you closed it or your credit report missing the “Closed by grantor” notation.

When should you keep a credit card open?

If you’re considering canceling a credit card for any of the reasons below, it may make sense to reevaluate and keep it open under some circumstances:

  • You don’t use it frequently. If you have an old credit card you don’t use often, and it has an annual fee, it may make sense to use it for small monthly recurring expenses. Maintaining an old credit account by making small payments here and there may seem counterintuitive, but doing so keeps your account in good standing and can keep your credit score balanced.
  • It’s the oldest card on your credit report. If you’re considering closing your oldest credit card, you should weigh the pros and cons first. Unless there’s a reason to cancel this card -- such as high fees or focusing on debt repayments -- it’s generally a good idea to keep your oldest card open so you maintain a longer average age of your credit accounts. 
  • You have no or few other credit accounts. Credit mix accounts for 10% of your credit score and considers the variety of accounts on your credit report, like revolving accounts, retail accounts or installment loans. If you only have one credit card on your credit report, keeping that account open and in good standing can help your score.

Alternatives to canceling your credit card

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

  • Negotiate for a lower rate. If a high APR is an 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. Look into a card with the same issuer with no annual fee. Alternatively, you could try negotiating for no annual fee for the same card. 
  • Transfer your balance to a 0% introductory APR card. To save money on interest, look into transferring the balance to a card with an intro rate with zero APR. If you can pay off the balance before the intro rate ends and the standard rate kicks in, making the transfer could be a good idea. 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 basic math and look into the fees to see if it’s worthwhile. 
  • Apply for a higher credit limit. If you don’t see the value in holding on to a basic credit card, consider requesting a credit limit increase for more purchasing power. You can typically request a credit limit increase online or via your card’s mobile app, but the process varies from issuer to issuer. 
  • Keep the card open, but use it sparingly. In this case, designate a specific use for the card and use it occasionally. Set limits on how much of a balance you want to carry and aim to pay it off in full each month. If you want to keep a credit card active but don’t intend to use it, the creditor can close inactive accounts. To keep your account active, make a small purchase every so often or use it to pay recurring expenses, like a streaming service subscription, and enroll in AutoPay to ensure you never miss a payment.

How to boost your credit after closing a credit card

If you do cancel a credit card, there are a handful of strategies you can follow to improve your score once the closed card falls off your credit report:  

  • Apply for a new credit card once you’re ready. If you canceled because of an annual fee, you might consider applying for a no-annual-fee card in the future. Or, if you cancel a card to repay debt or avoid overspending after your debt is paid off, you could apply for a credit-building card. When you’re ready, consider cards with preapproval options, so you know if you’re likely to get approved or not. This will help you avoid applying for too many at once and triggering multiple hard inquiries, which could cause your credit score to drop by approximately 5 points per inquiry.
  • Request a credit limit increase. If you have another credit card you plan to continue using, try requesting a credit limit increase to boost your credit utilization rate and keep your score up. 
  • Continue to pay your bills on time and in full. The secret to growing your credit score isn’t flashy or fast -- it’s developing good credit habits over time. Strive to make on-time payments for all your remaining credit accounts, and pay them in full each month, when possible, to minimize interest and late payment fees.

Is canceling your credit card wise?

If a credit card costs you too much money or hurts your credit score, it may be a smart idea to cancel the account. However, since canceling a credit card typically hurts your credit, if you are going to close your card, you can do it in a way that minimizes the damage to your credit file. Weighing the pros and cons can help you 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 an editor for CNET Money covering banking, credit cards and mortgages. Previously, she wrote about personal credit for Bankrate and 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.