How to cancel a credit card: Steps, impact on credit score & more

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Credit cards are valuable tools that offer convenience, rewards, and a way to build credit. But there may come a time when you decide a particular credit card no longer fits your needs or lifestyle. 

Maybe the annual fee is too high, the rewards don’t match your spending, or you want to simplify your finances. Whatever the reason, canceling a credit card isn't a decision to be made lightly. 

Here are seven key steps to cancel your credit card the right way. 

1. Assess your current credit cards

First, take a look at the cards in your wallet. Consider your reasons for canceling and determine if it's the best option. Canceling a credit card — and opening a new card right after — can impact your credit score, so you’ll need to take steps to maintain a good credit utilization ratio. 

2. Redeem any rewards

If you have any accrued rewards, now’s the time to use them. Check your cardholder agreement to understand what happens to your rewards after closing the account. In most cases, you'll need to redeem them before canceling to avoid losing them.

Some credit card companies may allow you to transfer rewards to another card within their network. If you’re upgrading your card or getting a new card with the same issuer, you may be able to keep your rewards. 

If your card also offers annual credits or other time-sensitive perks, you may want to consider using them before you close your card. 

3. Pay off outstanding balances 

Before canceling your card, make sure you've paid off the entire balance. If you cancel the card with an outstanding balance, you'll still be responsible for paying it off, and you may incur interest charges.

If it’s not possible to pay off your balance, consider transferring the balance to a low-interest card or contact the issuer about a payment plan. 

4. Update automatic payments 

Review any recurring payments and bills linked to the card you're planning to cancel. The last thing you want is for a payment not to go through or you to fall delinquent on your bills. 

Go through your statement and update any subscriptions, bills, or other payments with a different card or bank account.

5. Contact your credit card issuer

Call the company to let them know you want to close the account. Verify that your balance is zero. If you're still carrying a balance, your issuer will continue to charge interest on the outstanding amount. 

Sometimes, your card issuer may offer incentives to keep you as a customer, such as waiving the annual fee or offering bonus rewards. Consider these offers before making a final decision.

6. Send a cancellation request

Follow up with an email or letter confirming your desire to close the account. Include your account number, name, address, and phone number. Keep a copy for your records.

7. Check your credit report 

It can take up to two months for the cancellation to appear on your credit report, so wait about eight weeks before checking your credit. Closed accounts will stick around for 10 years.

You can request a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) or via AnnualCreditReport.com.

You’ll want to make sure your account is actually closed, and there are no erroneous charges or balances. 

Why would you want to cancel a credit card?

There are plenty of reasons why your credit card isn’t working for you anymore. Here are some of the most common reasons:

The annual fee is too high

Some credit cards charge hefty annual fees in exchange for rewards and benefits. If the fee outweighs the value, you may want to consider canceling the card or downgrading to a no-fee option.

You rarely use the card 

Multiple credit cards can be difficult to manage and may lead to unnecessary fees. If you have a card you rarely use, closing the account can simplify your finances and reduce the risk of fraud.

You want to switch to a better card 

As your financial situation and spending habits change, you may discover a credit card that better suits your needs. Whether it's a lower annual fee, better rewards, or a more appealing interest rate, upgrading to a new card may involve canceling your current one.

You have credit card debt 

If you find yourself overspending and accumulating credit card debt, closing the account can help you regain control of your finances. By removing the temptation to spend, you can focus on paying off existing balances and improving your financial health.

But remember that even though you're closing your card, you still have to pay off your existing balance. In that case, you may want to transfer your debt to a card with a 0% introductory APR offer. 

How closing a credit card affects your credit score

When it comes to closing a credit card, “most consumers think there won’t be any negative impact, especially when you’re trying to manage your debt,” says Renee Robinson-Jones, vice president at Georgia’s Own Credit Union. 

Unfortunately, closing a card can affect your score in several ways: 

• Credit utilization ratio: Your credit utilization ratio compares your total credit card balances to your total credit limits. A high ratio (above 30%) can negatively impact your score. When you close a card, you lose that card's credit limit, which can increase your overall utilization ratio if you carry balances on other cards.
• Length of credit history: The length of your credit history factors into your credit score. Closing an old credit card can reduce the average age of your accounts, potentially lowering your score.
• Credit mix: A diverse mix of credit types (like mortgages, car loans, or credit cards) can positively impact your score. If you only have one credit card and cancel it, your credit mix may be less robust.
• New credit: If you replace a canceled card with a new one, the hard inquiry from the new application can temporarily lower your score.

“Lenders like to see established relationships, a history of payments, and that the consumer is responsible in using the card and paying down the card,” says Robinson-Jones.

Alternatives to canceling a credit card 

Before closing a credit card account, consider these alternatives:

• Downgrade to a no-annual-fee card: Contact the issuer to see if you can switch to a card with no annual fee or a lower interest rate. This allows you to maintain your credit limit and history without incurring unnecessary costs. “The credit card issuer wants to retain the customer,” Robinson-Jones explains, so they’re usually willing to switch you to a different card that better meets your needs. 
• Negotiate with the issuer: If you want to keep your current card, ask the issuer if they would waive or reduce the annual fee, or request additional rewards to justify the fee. They may be willing to work with you to retain your business.
• Keep the card but use it infrequently: If the card has no annual fee, consider keeping it open but using it sparingly. Make occasional purchases and set up automatic payments to prevent the issuer from closing the account due to inactivity.

Frequently asked questions 

Will canceling a credit card hurt my credit score?

Canceling a credit card can potentially hurt your credit score by increasing your credit utilization ratio and reducing the length of your credit history. However, the impact depends on how old the account is, your credit score, and your credit utilization. 

Can I cancel a credit card with an outstanding balance?

It's best to pay off the entire balance before canceling a credit card. If you cancel a card with an outstanding balance, you'll still be responsible for paying it off, and you may face additional interest charges and fees.

How long does it take for a canceled credit card to be removed from my credit report?

A closed credit card account can remain on your credit report for up to 10 years from the date of closure. But the impact on your credit score will lessen over time, especially if you maintain good credit habits with your remaining accounts.

Can I reopen a canceled credit card account?

In most cases, you cannot reopen a canceled credit card account. If you change your mind after canceling a card, you'll typically need to apply for a new account, which will result in a hard inquiry on your credit report and potentially impact your credit score.

Do I need to cancel unused credit cards?

It's not always necessary to cancel unused cards, as they can contribute to a longer credit history and lower credit utilization ratio. However, if the card charges an annual fee or you're concerned about the potential for fraud, you may want to cancel the card. 

The bottom line 

Closing a credit card should be done with intention. Whether you're simplifying your finances, avoiding overspending, or adapting to lifestyle changes, be sure to weigh the potential consequences and take steps to maintain a healthy credit score.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.