How to Cancel a Credit Card Without Hurting Your Credit Score

It’s not as simple as just closing the card.

The act of canceling a credit card is easy. You just call your credit card company, ignore its pleas for your continued business, and tell it you don’t want its card anymore. But if things were really that simple, I wouldn’t need to write an article about it. Closing credit cards can have a significant impact on your credit score, so you need to know how to cancel your credit card in the right way. 

Sometimes the best decision is not to close the credit card at all, even if you’re not using it, while other times, you’re better off canceling it, though it may adversely affect your score. It’s an individual decision for every person with each credit card. Here’s what you need to know in order to make the right choice.Woman Cutting Credit Card

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Does canceling a credit card hurt your credit score?

Let’s get this question out of the way upfront. Canceling a credit card will likely hurt your credit score, but how much depends on a few factors, like what your credit limit is, how much you charge to the card, and how long you’ve had it. You probably won’t be able to stop your score from taking a hit if you’re determined to cancel the card, but if you plan carefully, you can minimize how much it drops.

What happens when you cancel a credit card

Canceling a credit card raises your credit utilization ratio and it could also lower your average account age, both of which can hurt your credit score. Your credit utilization ratio is the ratio between the amount of credit you are using and the amount you have available to you. So for example, if you have a $1,000 limit and you carry a $200 balance one month, your credit utilization ratio is 20% on that card ($200/$1,000 x 100 = 20%). 

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Your credit utilization ratio across all of your cards matters too. So if you have two cards with a $1,000 limit and one card with a $5,000 limit and you cancel the card with the $5,000 limit, you’ll be bringing your total down credit limit from $7,000 to $2,000, which could have a big impact on your credit utilization.

Credit scoring models like to see a credit utilization ratio under 30% and the lower, the better, as long as it’s above zero. This indicates that you’re living comfortably within your means while a higher credit utilization ratio suggests you need a lot of credit to sustain your lifestyle and that you might be at a higher risk of default. When you cancel a credit card, you’re reducing your available credit, which will automatically drive your credit utilization ratio higher. It’s a pretty big deal because your credit utilization ratio makes up 30% of your credit score

Average account age is another factor in your credit score. It’s the average age of all the credit accounts, including loans and credit cards, in your name. Lenders like to see an older average account age because it indicates that you have more experience dealing with credit and it enables them to better predict how you’ll manage new credit. Canceling a credit card you only opened a few months ago may not have much of an impact on your average account age, but if you cancel the first credit card you ever got, your average account age will probably drop quite a bit and your credit score will drop accordingly.

Canceling a credit card does not absolve you of your responsibility to pay any outstanding debt and it doesn’t mean that any negative marks associated with that account, like late payments, just disappear. Derogatory marks like these stay on your credit report for seven years, even if you’ve closed the account.

What to know before you cancel a credit card

Canceling a credit card doesn’t always make sense because of the negative impacts the move can have on your credit. Here are a few factors you should look at to decide if it’s the right move for you:

  • Credit limit: Closing a card with a higher credit limit will have a more significant impact on your credit utilization ratio than canceling a card with a lower credit limit. 
  • Effect on credit utilization ratio: Look at your average spending across all of your credit cards for the last few months and compare this to your combined credit limits. Calculate your credit utilization ratio and then estimate how it’ll be impacted if you cancel a credit card. If canceling the card would push your credit utilization ratio over 30%, you might want to rethink the decision or plan to charge less to your credit cards going forward to keep your ratio within a desirable range. You could also open a new credit card to bring your credit utilization ratio back down again.
  • Account age: Canceling newer credit cards is safer than canceling older cards because it’ll have a smaller impact on your average account age.
  • Annual fee: It might still make sense to cancel your card if it charges an annual fee that you’re not recouping in rewards each year, even though doing so might temporarily hurt your credit score.
  • Rewards: You usually lose your rewards points once you cancel a credit card, so use any that you’ve accumulated before you close the account for good.
  • Balance: Canceling a card without a balance makes things a lot simpler, but you can still cancel most cards if you’re carrying a balance. You’ll have to decide if you want to continue making monthly payments to your issuer or transfer the balance elsewhere.
  • Your own attitude toward credit: If you’re someone who is easily tempted to spend more money than you have, canceling a credit card might still be the right play, despite the hit to your credit score. With less credit at your disposal, you’ll have a harder time running up costly debts you can’t pay back.

You should also know that some issuers will try to keep your business when you call to cancel by offering you better reward terms, a lower interest rate, or waived fees. Decide beforehand if any of these offers would convince you to stick with the card. If not, don’t let yourself be swayed by your card issuer’s pleas.

Should you cancel a credit card?

It’s usually best to leave your credit card accounts open even if you’re not using them. They’re there if you need them to make a purchase and they’ll help your credit utilization ratio and your average account age, which will, in turn, boost your credit score.


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You can take the card out of your wallet, but you shouldn’t lose track of it entirely. Keep it somewhere where others do not have easy access to it and continue to monitor your account at least once per month to ensure that someone isn’t running up fraudulent charges on it. A bill for a card you’re not using might also raise your suspicions. Your card issuer might decide to close your account for you after a period of inactivity. You can try contacting the company and asking them to keep your account open, but it doesn’t have to comply if you’re not using the card. Consider making a few small purchases with the card here and there if you want to keep your account active. You could also set up autopay with your credit card for a small bill and then pay your credit card bill automatically from your bank account every month.

Closing a credit card might make sense if it has an annual fee and it’s costing you money. But if you don’t want to do this, you might be able to call your card issuer and negotiate the annual fee. If you’re willing to downgrade your account, you might be able to get rid of it entirely. Canceling your card might also make sense if you’re trying to limit your access to credit to reduce the temptation to overspend. If either of these scenarios apply to you, you’ll just have to make peace with a slight drop in your credit score for the time being.

Whatever you do, don’t close multiple cards at once because this will have a much bigger impact on your score. Limit yourself to one credit card cancellation every six months at most. This will give you time to gradually adjust your spending so that you can keep your credit utilization ratio within a good range and it’ll give your remaining credit accounts time to age a little more, improving your score. 

You should also limit how often you apply for new credit or request credit limit increases. While not as severe as canceling a credit card, these requests result in hard inquiries on your credit report, which drop your score by a few points every time. 

How to cancel a credit card without hurting your score

The steps you’ll follow for closing your credit card depend on whether or not you have an outstanding balance.

With no balance

If you don’t have a credit card balance, canceling your card is pretty straightforward. Just do the following:

  1. Use up any rewards you’ve accumulated. 
  2. Switch any automatic payments currently set up under the card you intend to cancel over to a different credit card to avoid accidental late payments after the account has closed.
  3. Contact your credit card company and tell it you want to cancel your card. Some companies may allow you to cancel your card online, but you may need to call the company or send a letter. Your credit issuer’s website should provide you with instructions. Your card issuer should send you a written confirmation in the mail. Follow up if you don’t get one within a week or two of your cancellation request.
  4. Destroy the credit card. Even though the account is canceled, it’s better to be safe than sorry. Cut the card up or use a shredder. For metal cards, try contacting the card issuer to see if they offer disposal or recycling services.
  5. Monitor your credit account. It’s unlikely, but if your card issuer partially refunds your annual fee or you recently returned an item, a credit could show up on your account after you’ve closed the card. If this happens, contact the credit card company and request that they send you a check for the credited amount.
  6. Monitor your credit report. Check your report to make sure that the account is correctly reported as closed. You may want to wait a few weeks to check this because the card issuer may not report it to the credit bureaus immediately. You can check your credit reports once per year with each bureau for free through
  7. Adjust your spending. Make sure you’re not using more than 30% of your new, lower credit utilization ratio. If you are, try charging less to your remaining credit cards or consider requesting a credit limit increase on some of your other cards to lower your credit utilization ratio again. Note that if you do this, it may cause your score to drop by another few points because of the hard inquiry your card issuer will do on your credit report. But this won’t matter if you’re approved because your new, lower credit utilization ratio will have a larger impact on your score.

With a balance

The steps for closing a credit card with a balance are essentially the same as closing a card without a balance except you also have to figure out how you’re going to pay back your debt. Some issuers might enable you to continue making monthly payments to them just as you have been. You’ll keep your same interest rate and when your balance is finally gone, you and the card issuer will part ways for good.

Some people prefer to wash their hands of the credit card all at once. In that case, you’ll need to transfer your balance to another card or take out personal loans for debt consolidation and use these funds to pay off your debt before closing the card. 

You can apply for a new balance transfer card so your balance will temporarily stop growing, and you’ll have a chance to pay it back interest-free during the 0% APR intro period. But be aware that there are often fees associated with a balance transfer, so you may still end up paying back a larger amount. Personal loans give you a predictable monthly payment, but their interest rates can also be high, particularly for those with poor to fair credit.

Waiting to close your card is also an option if you have only a small balance. Evaluate all your choices before deciding which is right for you. If you decide to continue paying your card issuer for now, you can always decide to take out a personal loan later to get rid of your obligation to the credit card company.

Canceling a credit card is a simple activity, but it requires a lot of careful thought in order to minimize its impact on your credit score. Go through the information above to decide if it’s the correct decision for you, and if it is, follow the recommended steps to close your card with minimum impact to your score

Source: – April 24, 2020

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