Closing a credit card can hurt your credit, especially if itâs a card youâve had for years. An account closure can cause a temporary hit to your credit by increasing your credit utilization, lowering your average age of accounts and possibly limiting your credit mix.
You might be tempted to cancel a credit card for many reasons. Maybe youre tired of annual fees on a card you rarely use, or you want a card with better rewards. Perhaps youd like to streamline your finances or eliminate a temptation to overspend.
There are times when canceling a credit card can be the right call. However, closing a credit card can hurt your credit, especially if its one of your oldest accounts and its in good standing (meaning youre making payments on time and as agreed). Read on to find out how closing a credit card can impact your credit and how to decide whether closing a card is right for you.
Closing a credit card account is a decision that should not be made lightly. While there can be valid reasons for canceling a card, doing so could negatively impact your credit score. This article will examine how closing a credit card affects your credit and steps you can take to minimize damage if you do opt to close an account.
How Closing a Credit Card Impacts Your Credit Score
When you decide to close a credit card it can hurt your credit score in a few key ways
-
Increased credit utilization ratio – This measures how much of your total available credit you are using. Canceling a card lowers your total credit limit, which can increase your utilization ratio. A high ratio signals high reliance on credit.
-
Reduced average age of accounts – The length of your credit history is factored into your score. Canceling newer cards won’t hurt as much as losing your oldest accounts.
-
Potentially less diverse credit mix – Having different types of credit (credit cards, installment loans, etc.) helps your score Eliminating a credit card could reduce your mix diversity.
The higher your credit score, the better able you are to qualify for loans and other credit products in the future. So you’ll want to avoid any hits to your score when possible.
When Canceling a Credit Card Might Make Sense
While closing a card could negatively impact your credit, there are some situations where it can be the right choice:
- The card has an expensive annual fee you no longer want to pay
- You struggle with debt or overspending when using the card
- You and a spouse are separating and need to close joint accounts
- The card has a high interest rate and you carry a balance
- You want to switch to a new card with better rewards or features
Even in these cases, consider alternatives to closing the account fully before pulling the plug.
Alternatives to Closing Your Credit Card
If you’re tempted to hang onto a card to avoid credit damage, here are some other options to explore first:
-
Ask for a waived annual fee – Many issuers will waive fees to retain customers.
-
Switch to a different card – You may be able to change to a new product with the same issuer while keeping your account history.
-
Make a small monthly purchase – This prevents inactivity that could lead issuers to close your card.
-
Store the card somewhere out of reach – This removes the spending temptation while still keeping it open.
How to Close a Credit Card Safely
If you do opt to close your credit card account, follow these steps to protect your credit:
- Pay off any remaining balance so you don’t accrue interest
- Redeem any unused rewards points before closure
- Update any bills set to auto-pay to the card to avoid issues
- Formally request closure from your card issuer and get confirmation in writing
- Destroy your physical card to prevent fraud once closed
- Monitor your credit report to ensure proper reporting of the closure
While closing a card can negatively impact your credit score in the short term, the effect lessens over time. Closed accounts in good standing remain on your credit reports for 10 years.
If you recently closed a card and took a credit hit, there are ways to rebuild your score. Using any open cards responsibly by keeping balances low and making payments on time can help offset the closure impact. Limiting hard credit inquiries by only applying for credit when needed is also beneficial. Check your credit reports regularly and dispute any errors with the bureaus.
Questions to Ask Yourself Before Closing a Card
Before making the decision to close a credit card, ask yourself these key questions:
-
Is this my oldest active credit card account? How much will losing it reduce my credit history length?
-
Will closing this card significantly increase my overall credit utilization ratio?
-
Does this card have an annual fee I can try to get waived before closing it?
-
Can I switch this card to another product with the issuer to avoid closure?
-
Can I simply stop using this card while keeping it open to avoid credit damage?
Running through this checklist can help you determine if closing a credit card still makes the most financial sense for your situation after weighing the potential credit score impact.
The Bottom Line
Closing a credit card account could hurt your credit, especially if you eliminate a long-held card in good standing. But there are times when cancellation is still the best choice. Consider alternatives to closing an account fully, and if you do opt to close, take steps to do so safely. Monitor your credit report after closure, and focus on other positive credit habits to offset any temporary score decrease. With prudent credit card management, a closure here and there likely won’t do major long-term damage to your credit.
How Closing a Credit Card Hurts Your Credit
Your credit score is calculated based on several different factors. Closing a credit card can impact some of those factors negatively and potentially lower your credit score. In more detail, here are some of the ways closing your account might affect your credit:
When to Keep a Credit Card Open
While it comes down to your personal preferences and financial situation, there are some times when it may be wise to keep your credit account open. For example, when:
- Its the oldest account on your credit reportâespecially if its the oldest by many yearsâand closing it would drastically reduce your credit length.
- You dont have any or many other open credit accounts, which can reduce your credit mix and result in a thin credit file, potentially making it harder to qualify for future credit.
- You have high balances on other credit cards and closing this one would drastically impact your credit utilization ratio.
- Youve kept the account in excellent standing over time, with an on-time repayment history that has helped keep your credit score strong.
Why you should CANCEL your old credit cards
FAQ
Is it better to cancel a credit card or keep it?
Keeping an unused credit card open can benefit your credit score – as long as you follow good financial habits. If an unused credit card tempts you to unnecessarily spend or has an annual fee, you may be better off canceling the account.
How bad does closing a credit card hurt you?
… reports for 10 years, so the length of your credit history won’t be negatively affected for a decade unless you decide to open a new credit card account …Jul 16, 2024
Is it better to cancel a credit card or keep a zero balance?
When you cancel a card you lose access to that card’s credit limit, so your overall credit limit goes down. Unless you carry a zero balance on all your credit cards, this change leads to a higher credit utilization ratio which can negatively impact your credit score.May 2, 2025
Is it better to close unused credit cards?
It’s typically better for your credit score to keep an unused credit card open, especially if it’s your oldest line of credit.
Does closing a credit card hurt your credit score?
That card’s available credit keeps your overall usage lower, which is a benefit to your score. Some might worry that closing an older card will hurt their credit score because it will shorten the cardholder’s credit history or “credit age.” But, that’s a common misunderstanding.
Does closing a credit card account make sense?
If it seems like closing the account is best, there are ways to help minimize the impact on your credit scores. Though keeping credit card accounts open could help you preserve your credit scores and maintain a positive credit history, there may be times when closing an account makes sense. Here are a couple of situations to keep in mind:
Does canceling a credit card hurt your credit score?
Because canceling a credit card can hurt your score, it’s smart to know what the potential impacts might be before making any moves. The potential harm to your credit score doesn’t mean you should never close a card, but it does mean you should think strategically and choose carefully. How does closing a card affect your score?
What happens if you close a credit card?
Some cards cancel any cash-back or other rewards you’ve earned when you close your account. If you have rewards points, redeem them, or you could forfeit them. Contact your credit card issuers. Call your credit card company to determine your payoff amount and process the account closure.
Is closing a credit card a good idea?
Closing a credit card may be the right move if you’re facing high fees, getting poor customer service, or navigating a separation or divorce. Although closing an account can lower your credit score, these circumstances often make cancellation the best option.
Does closing a 10 year old credit card hurt your credit score?
Example: If you have three credit cards, one you’ve had for 10 years, another for 5 years, and one for 1 year, closing the 10-year-old account will significantly lower the average age of your accounts, which can hurt your score. Lenders like to see a variety of credit types on your report.