Canceling a credit card
Quick insights
- Canceling a credit card may affect your credit score and result in losing any benefits or rewards tied to that card.
- Instead of closing a credit card, you may consider downgrading or limiting card usage to help maintain your credit history.
- When canceling a card, you will likely need to contact your card issuer, who will typically advise you how to safely destroy your card once your account is closed.
Canceling a credit card is a choice that can influence your finances and credit standing. Understanding the process, potential effects and available options may help with your weighing.
Can you cancel a credit card?
Yes, you can cancel a credit card, although some credit card issuers enforce specific conditions that may prevent an immediate or complete cancellation.
Canceling a credit card means you are permanently closing your account. People may choose to cancel their card for a number of reasons including annual fee costs, streamlining their wallet or closing a joint account when joint account ownership no longer makes sense.
Once you cancel, your card is deactivated, and you can no longer use it to make purchases or access that line of credit. Canceling a card does not wipe away your debt. If you have a balance on the card, you are still obligated to make payments until it is paid off. If your card earns rewards or has cardmember benefits, then you will typically forfeit those at cancellation.
How canceling a card may affect your credit score
Closing a credit card can impact your credit score in different ways.
One key area is your credit utilization ratio, which measures the credit you’re using compared to your total available credit. By closing a card, you lower your total credit limit, which may increase your utilization ratio and could potentially lower your score.
Another factor is the length of your credit history. When you close a credit card account, it may eventually stop contributing to the average age of your accounts, which can influence your score. However, accounts that are closed in good standing typically remain on your credit report for up to 10 years, continuing to reflect your positive payment history during that time.
Alternatives to canceling a card
Because canceling a credit card has the potential to affect your credit score, you may consider some alternative options, including:
- Reviewing card options: Instead of canceling, some card issuers will allow what's called a product change (also known as an upgrade or downgrade). This means you're switching to a different credit card but staying with the same credit card issuer.
- Reviewing your card benefits: If your rewards or benefits no longer align with your spending habits, you may want to contact your issuer to learn about available options.
- Evaluating card costs and features: If you're considering canceling because of an annual fee, your issuer may be able to explain available alternatives or options.
These options may help you retain your account history and remain in good standing.
What to do when canceling a credit card
If you decide you are ready to cancel a card after all, there are certain tips you may want to keep in mind. To close a credit card, you may want to consider the following steps:
- Contacting your issuer: You typically can call the customer service number on your card or log in to your online account to begin the cancellation.
- Paying off your balance: When you close a credit card account that still has a balance, the card is typically deactivated, meaning you cannot make new purchases or earn additional rewards. However, you are still responsible for paying off the remaining balance, and interest or fees may continue to accrue until the balance is paid in full. Policies vary by issuer.
- Using your rewards: Closing a card means you will likely forfeit any rewards you have earned, so you may want to redeem any rewards that haven't been used. If you can't redeem the rewards, you may be able to transfer them to a different card from the same issuer or a third party your card issuer partners with.
- Checking your credit report: A few weeks after cancellation, reviewing your credit report will help you to make sure your account appears as closed.
- Safely destroying your card: After closing, your issuer will typically instruct you on how to dispose of or destroy your card.
In summary
Generally, you can cancel a credit card, but you may want to consider how it may affect your credit score as well as the loss of your associated cardmember benefits. Closing a card can lower your credit utilization and the average age of your credit, both which may impact your credit score.
If you choose to cancel, your issuer can provide the necessary steps. If you have a balance, you will be expected to pay off any remaining balance. You will typically forfeit any card benefits or rewards you’ve earned when you cancel, so you may want to discuss alternatives and options with your issuer.
