How to Cancel a Credit Card (2024)

When you have a credit card you don’t use, canceling it might seem like an obvious move. That’s especially true if the card carries an annual fee or you’re prone to overspending. But if you aren’t careful, getting rid of a card can have unexpected consequences, such as a ding to your credit score.

That’s because credit bureaus look closely at how much credit you have access to, and axing one of your cards can significantly reduce this amount. Luckily there are ways to lessen the damage or even avoid it altogether. Here are five simple steps to canceling a credit card—the right way.

Steps to canceling a credit card

1. Pay or transfer the remaining balance

It’s possible to close a credit card if you still have a balance on it. You’ll still owe the money, but will no longer have access to draw from the credit card. For that reason, it’s usually best to pay off the balance in full before you cancel. This will ensure the account will appear on your credit reports as “paid as agreed.”

If the balance is too high, consider transferring it. Currently, the best balance transfer cards offer up to 21 months of no interest on transferred balances (Buy Side’s top pick, though—the Chase Slate Edge—has an 18-month 0% APR). Note that this type of card usually requires good or excellent credit. You’ll also pay a balance transfer fee—generally between 2% and 5% of the total amount transferred.

Does it ever make sense to cancel before fully paying off your card? It might if the card has you feeling tempted to spend more than you should, says Kenneth Chavis IV, a financial planner at wealth-management firm LourdMurray in Los Angeles. “This is a behavioral debt management strategy,” he explains.

2. Spend or transfer the rewards

Points and miles from co-branded hotel and airline credit cards will stay in your rewards program account even when you cancel the card. However, that’s not the case with general rewards cards (see our best rewards credit cards picks for recommendations). You’ll need to spend or transfer these rewards to avoid losing them.

You can typically transfer your points to the issuer’s airline or hotel partner. Keep in mind that transfer times can vary widely. While most programs allow for instant transfers, others may take up to 14 business days to move your rewards.

If your credit card has an online rewards marketplace, you may also be able to use your remaining points toward gift cards at your favorite retailers. This will allow you to cash in your points, but technically use them at a later date. (To be clear, though, you’ll typically get more value with other methods of reward redemption.)

3. Contact your bank

Call your bank or get in touch through their online message center and let them know you want to close your credit card. Make sure to ask for written confirmation of your closed account status and $0 remaining balance. This way, you’ll have proof in case the bank doesn’t report the account closure to credit bureaus correctly.

4. Check your credit report

The bank isn’t likely to report your closed account right away. Give it four to six weeks and check your credit report to ensure the account is marked as closed at your request and paid as agreed. Contact your credit card issuer if it isn’t and file a dispute with credit bureaus if the bank doesn’t correct the error. Note that correcting an error with one credit bureau might not impact your credit reports with other bureaus. For that reason, it’s best to go through the dispute process with each bureau—TransUnion, Equifax and Experian—separately.

5. Dispose of the card

You can destroy a plastic credit card using scissors or a shredder. If you have a metal credit card, return it by mail to the credit card issuer—your issuer can send you a prepaid envelope at your request. Alternatively, you can simply return the card to a local bank branch.

Does canceling a credit card hurt your credit?

Your credit score is made up of five elements: Credit history, credit utilization rate, credit mix, payment history and new credit inquiries. Canceling your credit card will impact several of these.

First, closing a card may hurt your credit utilization ratio—the second most important credit factor after payment history. A credit utilization ratio is the percentage of the available credit you use. You want to keep that number under 30% to avoid losing credit score points.

Say, you have two credit cards with a $2,000 credit limit and a total of $500 in credit card debt. Your credit utilization ratio is 25%. If you close one card but your balance stays the same, the ratio will jump to 50%. In this scenario, your credit will likely sustain some damage.

“Closing a credit card doesn’t mean you will automatically negatively impact your FICO score,” says Jenelle Dito, senior director at FICO. But, “You could see a drop in your credit score if closing that account results in your credit utilization increasing.”

Luckily, you may be able to mitigate that damage by asking for a credit line increase on another credit card you have, says to Beverly Harzog, author of five books about credit and personal finance, but it’s best to only do that if you’re in good standing on your card to avoid the opposite result. It’s possible a credit card issuer could review your case and decide to slash your credit limit instead.

“I always say don’t call attention to yourself if you can’t withstand the scrutiny,” Harzog warns. “If you’ve had a sloppy payment history—don’t try that.”

Canceling your card could also impact the length of your credit history—or how long you’ve been using credit, which makes up 15% of your credit score. Generally speaking, the longer you have accounts open (and in good standing), the better your score will be. Fortunately, Dito says, even closed cards will stay on your credit for up to 10 years, so as long as you’ve paid yours on time, every time, closing it out shouldn’t hurt much—at least in the near term.

Finally, canceling a card can also change up your credit mix, especially if it’s your only card. You’ll typically want a good mix of credit types to achieve the highest score—so a few credit cards, a mortgage, a car loan, etc. Taking cards out of the mix could reduce your score in this area.

Can I cancel a credit card I just applied for?

You can cancel a credit card at any time. If you’ve applied and soon realized the card isn’t right for you, you can close the account. Keep in mind, however, that a credit card application triggers a hard inquiry on your credit report, which can cost you some credit points. The inquiry stays on your credit for two years and impacts your scores for one year, even if you close it.

If you open a card only to get a sign-up bonus and cancel it after you get and spend the rewards, that’s a practice known as “credit card churning.” While this can be a way to maximize rewards and points, it may also hurt your credit, according to Experian, as it lowers the average age of your accounts, which makes up 10% of your credit score.

Plus, lenders also notice this kind of behavior and may become skeptical when you apply for more credit, says Yanely Espinal, director of educational outreach at Next Gen Personal Finance, a nonprofit providing personal finance curriculum to middle- and high-school teachers.

“It makes them think that maybe your financial reputation is not so strong because you’re borrowing money from so many different people at the same time,” she notes.

Should I cancel my credit card?

Credit coach Jeanne Kelly recommends only canceling a credit card in two scenarios: If you have a joint card with someone you want to disconnect from (a former spouse, for instance) or if there’s an annual fee—and you can’t downgrade to a lower-cost one for free.

For one, she says, “If there’s no fee, there’s no harm in keeping them,” Kelly says. “And occasional use, even once or twice a year, can contribute positively to your credit.”

Another reason to keep those cards open? You never know when you might find yourself in a bind and need some cash. “I’ve seen individuals who walked away from credit when they believed they no longer needed it, only to find themselves in need later on,” she says.

Alternatives to canceling a credit card

How many credit cards you should have depends on your shopping habits—and your willingness to play the points game. There may be valid reasons to get rid of a credit card, but it’s a good idea to consider alternative solutions first.

For instance, if the card doesn’t offer enough value for your spending, you can call the credit card issuer and ask for a product change. This means that you’ll get a different credit card but keep the same account and credit limit.

Issuers have different rules for product changes but it doesn’t hurt to explore your options before you decide to close your credit card account. For example, Bank of America is rather flexible with product change rules. Say, you’re not traveling enough to justify paying $95 a year for the Bank of America® Premium Rewards® Credit Card. You may be able to switch to a no-annual fee cash back card like the Bank of America Unlimited Cash Rewards. Chase, on the other hand, is more strict and only allows product changes within the same card family.

If you struggle with overspending, it may be good for your financial well-being to get rid of your credit card. You can also consider locking your card from within your online account or mobile app, Espinal suggests. This stops any new charges while still allowing previously authorized and recurring charges.

—Additional reportingbyAly J. Yale

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