“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Show
Their reviews hold us accountable for publishing high-quality and trustworthy content. About our Review BoardWritten by Holly D. Johnson Written by Holly D. JohnsonArrow RightAuthor, Award-Winning Writer Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Holly D. Johnson Edited by Liliana Hall Edited by Liliana HallArrow RightAssociate Editor Liliana is an editor and journalist with a background in feature writing on the Bankrate Credit Cards team. Liliana Hall Reviewed by Mariah Ackary Reviewed by Mariah AckaryArrow RightEditor Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited to help people make good decisions with their money. Send your questions to [email protected] Closing a credit card can subtract points from your credit score. The impact is likely to be greatest if you are relatively new to credit and/or have few cards. A lower credit score might make it harder to qualify for an apartment, a loan or another credit card, particularly if your credit score is near a lender’s cutoff. (You can see where you stand with your free credit score, which updates weekly on NerdWallet.) The potential loss of credit score points doesn’t mean you should never close a credit card, but it does mean you should think strategically and choose carefully. Get score change notifications See your free score anytime, get notified when it changes, and build it with personalized insights. How canceling a card can hurt your scoreIt’s smart to have an idea of what closing the card would do to your credit score before you do it. Credit limits, and how you use them, matterCanceling your cards with the highest credit limits could potentially do the most damage. The second-biggest influence on your score is how much of your credit limits you have in use, called credit utilization. That’s calculated both per card and overall. Personal finance experts recommend using less than 30% of your overall credit limit; the highest scorers generally use less than 10%. Here's an example: Say you have three credit cards, two with $5,000 limits and one with a $10,000 limit, for a total of $20,000. If your total balance across all three cards is $2,000, your overall credit utilization is 10%. Canceling the card with the $10,000 limit cuts your overall credit limit in half. Then, your $2,000 balance is 20% of your limits, and that higher utilization will affect your credit score. With credit, older is betterThe impact of closing accounts depends on which credit scoring formula is used. FICO, which is the most commonly used formula, continues to use both open and closed accounts in calculating the age of your accounts. VantageScore, which is a FICO rival, may not. So closing an account may reduce the average age of your credit accounts and potentially lower your VantageScores. When canceling a credit card makes senseHere are some reasons why you might want to cancel. High annual fees or poor customer serviceNot all credit cards are a great match, and there are some valid reasons for wanting to close out your account. For example, If the card carries an annual fee you don’t think is worth it, you might want to cancel. You also might want to if customer service is consistently poor. You've graduated to a permanent cardSome cards aren't meant to be kept forever. Secured cards, for example, are like credit-card training wheels. Once you’ve shown you consistently pay on time, some issuers will allow you to “graduate” to an unsecured card with better terms. But if the issuer doesn't offer cards that are more desirable, canceling may be a smart option. (Before closing your account, take these steps.) Divorce or separation from a spouseSometimes life events make canceling a credit card the best choice. If you are getting a divorce or separating from a spouse, disentangling your finances might be one of the first steps you take. When it comes to credit cards, this means canceling joint credit cards or removing yourself or your spouse as authorized users to protect yourself from unauthorized spending. Alternatives to cancelingBefore initiating the credit card cancellation process, there are a few steps you can take to remedy the issues that are causing trouble: Call and ask for better termsIf you are canceling because of fees, you could consider calling the issuer and asking if it has cards you would qualify for that are fee-free. You might be able to switch to another card from the same issuer and keep your payment history. The same goes for cards that are no longer a good fit. Maybe you wanted an interest-free period when you opened a card and now you would rather have a travel rewards card. If the issuer offers one you qualify for, you may be in luck. Build your score and then switchIf you don't qualify to switch to something with better terms right now, you could keep the current card active and paid off every month to help build your credit score. Moving up to a higher score could eventually make you eligible for a new credit card that offers rewards and specific perks. Try different ways to avoid overspendingIf you find yourself wanting to cancel a card to prevent the temptation to overspend, there are other paths to take. Try removing the card from your wallet and tucking it away in a safe place. The card won’t be easy to access but will be there if you need it in an emergency. You could also wipe out the saved payment information at your favorite shopping sites where mindless spending can occur. Steps to safely cancel a credit cardIf you’ve decided that canceling is the best option, take these steps to make sure you’re doing it in a way that won’t harm your finances:
|