Does canceling a credit card hurt your credit?

This content is for general educational purposes and is not intended as financial, legal, investment, or tax advice and should not be relied on as such. We do not guarantee the accuracy or completeness of the information found in this post.

Summary

• Canceling a credit card can lower your score if it makes your overall credit use (utilization) go up.

• Closing a credit card can also shorten your average account age over time, which can affect your score.

• You can lessen the impact by paying down balances, moving credit limits, or downgrading to a no-fee card instead of closing.

• Try to avoid closing a card right before applying for a big loan, like a mortgage or auto loan.

• Make sure to redeem your rewards, stop autopayments, and confirm a zero balance before you close a card.

Thinking about canceling a credit card can feel stressful. You want a simpler wallet and lower fees, but you don’t want a surprise hit to your credit. The good news is you can make a plan to help protect your score. 

Start by understanding how closing a card affects your credit, then explore a few easy ways to help lessen the impact. That way, you’ll feel confident making the decision that fits you best.

How canceling a card can affect your credit

When canceling a credit card, there are two key parts of your credit score to take into consideration. Here’s a breakdown of both:

1. The first is credit utilization, which is how much of your total revolving credit limits you’re using. When you close a credit card, your overall available credit goes down. As a result, even if your remaining balances stay about the same, you’re using a bigger share of your total available credit—and that can lower your score. 

2. The second is the length of your credit history, which looks at how long your accounts have been open. Closing a card doesn’t erase the past, but it can reduce your average account age over time. Closed accounts in good standing often stay on your credit reports for several years, which can help your credit history during that time. But eventually, they can fall off, and that can shorten your average account age.

When canceling a card might make sense

There are situations, however, when canceling a credit card can be a good idea. For instance, you might close a card if it no longer fits your budget or spending habits. A common example is paying a high annual fee that isn’t worth the benefits you’re getting.

A card that tempts you to overspend or adds clutter to your routine can be another reason to close it. In those cases, simplifying your credit mix may be a reasonable choice, even if it means closing a card.

Canceling a card can also help if the card’s terms changed in a way that doesn’t work for you. Maybe the rewards are now difficult for you to use, or the potential benefits no longer match your spending. If upgrading or switching cards with your issuer didn’t work out, closing the card might be the simplest next step.

When you may want to keep it open

With that said, keeping something like a no-fee card open can sometimes support your revolving credit utilization and your credit history. Even a small unused limit can help keep your overall utilization ratio lower. If the card is also one of your older accounts, keeping it open could also potentially support your average account age over time.

If the only issue is the annual fee, you can ask about a product change. A product change means moving your current credit card account to a different card from the same issuer without opening a brand-new account. For example, many issuers can switch you to a no-fee version of your card while keeping your account history.

Minimizing impact if you cancel

You can start by lowering your revolving balances across other cards. This helps keep your credit utilization in a healthy range after you close a card. If you have another card with the same issuer, you can also ask if you can move part of the credit limit (the most you can charge on your card) from the card you plan to close to a card you’ll keep. That can help protect your total available credit limit.

With credit, timing is important. It’s generally best to avoid closing a card shortly before a major loan application, like a mortgage or auto loan, since lenders can review your credit profile multiple times during the process.

Steps to take before you close a credit card

1. Start by redeeming your rewards so you don’t miss out on their value.

2. Next, move or cancel any autopayments, like subscriptions or utilities that are connected to the account and switch them to another card. 

3. Then, pay the balance to zero on the card you want to cancel and wait for the next statement to confirm no new charges or residual interest.

4. Now—before canceling the card—you may want to call customer service and ask about a product change. That is, if this is a route you’d like to explore. After this, if you still want to cancel, you can ask the agent to confirm the account will close with a zero balance and confirm there are no pending fees or other charges. 

5. Finally, remove the cancelled card from your digital wallets, cut it up, and check your old account online for a month or two to make sure no stray charges or refunds come through.

What to do after you close a card

Watch your utilization. If it rises, consider paying down balances on your remaining credit cards over the next month or two. It’s a good idea to keep your remaining cards active with small, planned purchases and on-time payments. This steady pattern can help your credit profile and support your credit score over time.

Review your credit report to confirm the account shows as closed with a zero balance. If you see an error, you can file a dispute with the major credit bureaus (with supporting documentation) so your credit report  stays accurate. 

It’s a good idea to revisit your open credit cards periodically, and make sure each one still makes sense for your personal finances. 

Special situations when closing a credit card

If you’re an authorized user (someone allowed to use another’s card) on someone else’s card, you can ask to be removed without closing the primary account. If someone is an authorized user on your card, removing them before you close or change the account prevents any confusion about access, notifications, or account information once the account is no longer active. For joint accounts, both people should agree on the plan and confirm how payments will be handled.

If the issuer threatens to close a card for inactivity, you can keep it alive with a small purchase every few months. You can keep the card open while avoiding interest charges if you pay the balance in full each month.

What you can do instead of canceling your credit card

Whether you want fewer fees or less temptation, you still may have options that protect your credit. You can consider trying some of these steps (or look at some ways to avoid common credit mistakes) before you close the account.

• Request a product change. A product change moves your current credit card account to a different card from the same issuer. Ultimately, you keep your account history, and you may even be able to switch to a no-fee credit card (if your current card has fees). Ask if rewards or features will change and decide if it’s still a fit for you.

• Request a retention offer. A retention offer is a credit the issuer may give to keep your business, like a fee waiver or bonus. It isn’t guaranteed. Typically, you’d call and politely explain why you’re thinking of closing. If the offer makes the card worth keeping, great. If not, you can still move forward with your original plan to close the account.

• Consider moving part of your credit limit to another card with the same issuer. Some issuers let you shift part of a limit from the card you want to close to a card you’ll keep. This can help maintain your total available credit, which supports your credit utilization.

• Downgrade your card before the annual fee posts or is charged. An annual fee is the yearly cost to keep a credit card open. If you reach out before the annual fee hits, many issuers can move you to a no-fee version of your card. Always make sure to confirm how your rewards and benefits attached to your card may change.

• Keep the card open with a small recurring charge. Put one low, predictable bill on the card, like a streaming service. Turn on autopay for the full amount so you never carry a balance. This helps keep the account active with very little effort.

• Use spending controls and alerts. Many apps let you lock a card when you are not using it, set purchase limits, or restrict certain types of transactions. You can typically turn on alerts for due dates and large charges so you catch issues faster.

• Reduce the credit limit if overspending is the concern. Lowering the credit limit on a card can help you stay on track. Remember that a lower limit can raise your utilization ratio if your balances do not change, so it’s a good idea to plan to keep balances low.

• Remove authorized users if needed. An authorized user is someone you allow to use your card. If shared spending is causing stress, you can remove the user instead of closing the account.

• If your card has a high interest rate, paying in full each month can help you avoid extra costs. You can use  the card for small, planned purchases and pay in full each month. 

These options can help give you more control while also helping you avoid the potential credit score impact that can come from closing a card. You can always pick one or two that fit your goal, try them for a few months, and then revisit your plan.

How to keep an eye on your credit

Check your credit score regularly to make sure the information is accurate and up to date. You can do this through some banks and reputable personal finance apps. 

You can also review your full credit report for free at AnnualCreditReport.com. Each bureau is required to provide at least one free report per year, and currently, free weekly reports are available. Monitoring your credit score and reviewing your credit report helps you spot potential issues early and protect your financial health.