Canceling a credit card: What to know

There are lots of reasons you might want to close a credit card. You may not use it anymore, or it doesn’t give you the type of rewards you want. 

But before you do, make sure you understand how closing a card might impact your credit scores. 

What you’ll learn:

• Your cardholder agreement or your card issuer’s website is a good starting point when figuring out how to cancel your credit card.

• Some things you might have to do when closing your credit card include paying off the balance, contacting the card issuer and requesting a confirmation letter.

• Closing a credit card could have a negative impact on your credit scores.

• You might want to consider upgrading or swapping to a new card instead of closing your account.

According to the Consumer Financial Protection Bureau (CFPB), you can generally close your account by calling the credit card issuer and then sending them a written notice. But issuers might also offer online options.

Here are the general steps you can take:

Depending on the card issuer, you might be able to close a credit card with a balance still due. But you’ll need to make at least the minimum payments on schedule until the balance is paid off. Plus, you might continue to be charged interest on what you owe. So you might prefer to pay off any balance before you close the card.

Earning rewards is one of the major advantages of credit cards. It’s a good idea to make sure you know what will happen to yours if you close the card. You might be able to keep them, or you may lose them. You might also be able to cash them in, or have a limited time to redeem them.

When you’re ready to close your account, usually you can simply call the credit card issuer. This number can be found on the back of your card. You may be asked for written confirmation, as well.

When a credit card is closed, it’s typically reported to the three major credit bureaus. You can check that the closure was reported properly by getting free copies of your credit reports at AnnualCreditReport.com. Bear in mind it may take some time for a cancellation to show up. 

You can also use CreditWise from Capital One. It’s free, and using it won’t impact your credit scores. And with the CreditWise Simulator, you can even learn how your score might go up or down if you close a card.

You can help prevent credit card fraud and identity theft by destroying your credit card once the account is closed. If your card is made of plastic, you can shred it or cut it into small pieces. If it’s made of metal, you might be able to send it back to the issuer for disposal.

Closing a credit card can affect a couple of factors that go into calculating your credit scores.

The longer a credit card has been open and used responsibly, the more beneficial it tends to be for your credit scores. That’s because it contributes to your length of credit history. And, as the CFPB explains, “Credit scores are based on experience over time. The more experience your credit report shows with paying your loans on time, the more information there is to determine whether you are a good credit recipient.”

The amount of available credit you have across all your revolving credit accounts is referred to as your credit utilization ratio. When you close a credit card, you lower your total available credit. And that can increase your credit utilization ratio.

The CFPB recommends keeping your credit utilization below 30% of your available credit to avoid a negative impact on your scores.

If you plan on applying for a new card once you close your existing one, the issuer will run a hard inquiry on your credit. This can also lower your credit scores—usually by just a few points. But if you apply for multiple new cards at once, the impact may be greater.

Everyone’s circumstances are different, but there are times you might decide that closing a card is the right call. For example, the annual fee may no longer be worth it. 

Remember that closing a card could have a negative effect on your credit. If that’s the case, it may be worth considering alternatives.

Before closing a credit card account, you can consider these options.

Upgrading or swapping to a different card with the same issuer could be an option. You may be able to keep your existing account history while finding a card with rewards or a credit limit that suits you better.

If you’re hoping to consolidate your debt or lower your interest rate, you might consider a balance transfer credit card. Just be sure to factor in any fees or terms involved.

If your card hasn’t been getting much use but closing it might hurt your credit, you could keep it active by setting up a small recurring purchase. This should prevent it being closed by the lender for inactivity. If your lender offers a card lock feature, you can even lock it to ensure accidental charges don’t pop up.

Here are some frequently asked questions about closing credit cards:

Closing a credit card typically requires a few simple steps. But it’s worth weighing how it might affect your credit before you do anything. 

If you’re considering swapping or upgrading your credit card, you can start by comparing Capital One card options or seeing if you’re pre-approved for any offers. It’s quick, easy and won’t hurt your credit.