Canceling a credit card: What to know

There are lots of reasons you might want to close a credit card. Maybe you don’t use it anymore, or it doesn’t give you the type of rewards you want. But before canceling your card, there are a few things to consider, like how doing so might affect your credit scores. 

Read on to learn the steps to cancel a credit card. Plus, discover how canceling a card can affect credit scores and whether there may be an alternative option that’s better for your needs.

What you’ll learn:

• Your cardholder agreement or your card issuer’s website is a good starting point when figuring out how to cancel your credit card.

• Some things you might have to do when closing your credit card include paying off the balance, contacting the card issuer and requesting a confirmation letter.

• Closing a credit card could have a negative impact on your credit scores.

• You might want to consider upgrading or swapping to a new card instead of closing your account.

According to the Consumer Financial Protection Bureau (CFPB), you can typically close a credit card account by calling the credit card issuer and then sending them a written notice. But issuers might also offer online options.

Here are the general steps you can take to close a credit card account:

Depending on the card issuer, you might be able to close a credit card with a balance still due. But you’ll need to make at least the minimum payments on schedule until the balance is paid off. Plus, you might continue to be charged interest on what you owe. So you might prefer to pay off any balance before you close the card.

Earning rewards is one of the major advantages of credit cards. It’s a good idea to make sure you know what will happen to any rewards you’ve earned if you close the card. You might be able to keep them, or you may lose them. You might also be able to cash them in or have a limited time to redeem them.

If you were using the card to cover any automatic or recurring payments, you’ll need to move those charges to a new payment method. Doing this before closing your credit card account may help you avoid late or missed payments.

When you’re ready to close your account, usually you can simply call the credit card issuer. This number can be found on the back of your card. You may be asked for written confirmation, as well.

When a credit card is closed, it’s typically reported to the three major credit bureaus. You can check that the closure was reported properly by getting free copies of your credit reports at AnnualCreditReport.com. Bear in mind it may take some time for a cancellation to show up. 

You can also use CreditWise from Capital One. It’s free, and using it won’t impact your credit scores. And with the CreditWise Simulator, you can even learn how your score might go up or down if you close a card.

You can help prevent credit card fraud and identity theft by destroying your credit card once the account is closed. If your card is plastic, you can shred it or cut it into small pieces. If it’s made of metal, you might be able to send it back to the issuer for disposal.

Yes, canceling a credit card could potentially harm your credit because it can affect several factors that go into calculating your credit scores.

Here are a few reasons that closing a credit card could hurt your credit:

The longer a credit card has been open and used responsibly, the more beneficial it tends to be for your credit scores. That’s because it contributes to your length of credit history—a factor that makes up 15% of your FICO® score. 

The amount of available credit you have across all your revolving credit accounts is referred to as your credit utilization ratio. When you close a credit card, you lower your total available credit. And that can increase your credit utilization ratio.

The CFPB recommends keeping your credit utilization below 30% of your available credit to avoid a negative impact on your scores.

If you plan on applying for a new card once you close your existing one, the issuer will run a hard inquiry on your credit. This can also lower your credit scores—usually by just a few points. But if you apply for multiple new cards at once, the impact may be greater.

Having a diverse mix of credit account types, or credit mix, is another factor that affects your credit scores. This means it’s best for your credit scores when you have both revolving credit accounts (like credit cards) and installment loans (like a mortgage or car loan). If canceling your credit card impacts your credit mix enough, it could bring down your scores.

Everyone’s circumstances are different, so deciding whether to cancel a credit card or keep it open is a personal choice.

Here are a few considerations to keep in mind when deciding whether you should cancel your credit card:

• Can you afford having and using the card? Consider the annual fee, the interest charges if you typically carry a balance and whether having the card puts you at risk for overspending.

• How would closing the card impact your credit? Consider how long you’ve had the credit card account, whether you have other forms of revolving credit for your credit mix and how drastically your credit utilization ratio may be affected.

• Is the account in good standing? Consider whether your account shows a history of on-time payments and has been positively impacting your credit scores.

There are times you might decide that closing a card is the right call. But remember that closing a card could have a negative effect on your credit. If that’s the case, it may be worth considering alternatives.

Before closing a credit card account, you might want to consider alternative options:

• Upgrade or swap your card: Upgrading or swapping to a different card with the same issuer could be an option. This would enable you to keep your prior account history while finding a card with rewards or a credit limit or annual fee that suits you better.
• Consider a balance transfer: If debt challenges are behind your reasoning for closing your card, one option to consider is a balance transfer credit card. If a card swap isn’t an option, moving your balance to a new card with a low introductory rate may be a helpful way to help pay down debt.
• Use your card for occasional transactions: If you decide to keep your card open to benefit your credit but don’t want to use it much, you could keep it active by using it for occasional charges or setting up a small recurring purchase. This should prevent it being closed by the lender for inactivity. If your lender offers a card lock feature, you can even lock it to ensure accidental charges don’t pop up.

Here are some frequently asked questions about closing credit cards:

Closing a credit card typically requires a few simple steps. But it’s worth weighing how it might affect your credit before you do anything. 

If you’re considering swapping or upgrading your credit card, you can start by comparing Capital One card options or seeing if you’re pre-approved. It’s quick and easy and won’t hurt your credit scores.