Will Closing a Credit Card Hurt Your Credit?
You might have good reasons to cancel a credit card. Maybe you no longer make use of it, or you’ve decided to downgrade to a card with a better rewards program. But before making any decisions, consider the following: Closing credit accounts can hurt your credit rating, so it is likely that it will be worth it if you keep them open.

Credit cards are among the ways your credit rating will be affected when it closes.

How Closing a Credit Card Will Affect Your Credit Score

Closing a credit card can have an impact on your credit score for a number of reasons.

When opening a credit card account, you forfeit the credit limit available on the card. By doing this, your utilization ratio, or the percentage of your available credit you’re using, increases—and that is a sign that you’re risking your borrowing options. Among the main recommendations you will find is to keep your utilization rate under 30%. Typically, the lower the percentage, the better. To calculate your credit utilization ratio, divide your total of all your credit card balances by your total of all your credit limits; your resulting percentage is your utilization ratio.

Closing a credit card can lower your FICO score, as it’ll decrease the average age of accounts on your credit report. Your credit score is based on the age, quantity, and length of your payment histories, so opening and closing credit card accounts may affect it. If an account has been closed in good standing for 10 years, and still appears on your credit report during that time, it should not have an immediate effect on your credit report. Nonetheless, late or missing payments on a closed account will continue to be on your credit report for seven years.

Your credit rating may go down initially after closing a credit card, but it usually returns to its previous level if you continue to pay your balance on time. You simply closed an account and did not acquire any new debt, which took some time to divulge. If you intend to apply for additional credit in the coming days, don’t cancel a credit card.

When Canceling a Credit Card Makes Sense

If it’s practical, canceling a credit card may be advisable in some situations. For Example, if:

The card comes with an exorbitant annual fee and the benefits aren’t worth it to you.
The rate of interest on the bank card is high, and you will need to carry a balance.
You are having a hard time controlling the cost of your debt and are finding it difficult to avoid the need to live beyond your means with the credit.
You want to get rid of the student or secured credit card that you have to exchange for the regular or rewards credit card.

When It’s Better to Keep the Card

Similarly, there are circumstances where it can be smarter to maintain the account open, such as when:

It is the oldest account on your credit report.
As a result, you may end up with a low credit score, limiting your access to all credit cards and other forms of credit.
The main reason you’re canceling it is that you don’t use it very much.

How to Close a Credit Card Safely

Ways to cancel your credit card are explained here: if you’re ready to cancel your account, be sure to follow these steps:

If you’re satisfied with your credit card balance, get in touch with your credit card provider and work out a plan to make payments. If you can, paying off the card before cancellation is a good idea.
Redeem any outstanding rewards to prevent your rewards credit card’s remaining balances from being wasted.
Contact customer support and inform them you’d like to close your account, and ask that they document it with a notice in writing. Ask that it be noted that the account was closed at your request.
Fill in the below fields to provide your response, such as your mailing address, name, telephone number, credit card account number, and the details of your appointment with customer service. Make sure to explain that you’d like the account to be canceled, and keep a copy of the correspondence on file. If you do not receive confirmation within 1 month of submitting your alert, call your credit card issuer to request an update.
If the credit card is linked to an automatic payment such as a cell phone bill or Spotify account, your payments will be missing if you do not amend your information.
Inform authorized users that you’re closing the credit card account and ask them to destroy the card.
Now it is your turn to properly destroy your credit card. If your shredder can digest credit cards, put it through it. If not, shred them into a fine pulp, and consider removing small portions of the pulp to different locations within your house, which makes it less likely that a visitor will be able to retrieve your credit card information collectively.

Alternatives to Canceling a Credit Card

If you still have your card around, you can fix the problems that were making you look forward to canceling it.

For credit card accounts with hefty yearly fees, call your credit card issuer and ask if they would be willing to lower or even get rid of that annual charge just for another year. Some credit card issuers may be willing to do this just to retain their customer base.

If you’re hesitant about overspending with your bank card or getting into more debt, stash it somewhere securely or even freeze it in a block of ice. If you are truly struggling with your willpower, some issuers will allow you to pause your credit card account, meaning it can’t be used by anyone, but it’s not closed. Call your card issuer’s customer support and ask for whether this option is available to you.

If you wish to remove your card whether you hardly ever use it, keep it active by putting one tiny purchase on it yearly or by putting a small recurring monthly cost on it, for example, your Netflix subscription. Just make sure to remember about it and pay it off right away so that you’re not left paying interest. By keeping your card open and active, there’s much less thought you have to devote to keep your card active. Some issuers will deactivate your card if you haven’t used it for one year.

Check Your Credit Before Closing an Account

Closing a credit card account can make sense in certain circumstances, but it’s important to recognize how it may affect your credit. Before closing your account, consider checking your own credit report to see how close you are and if closing it will leave you with a credit report that is too thin or too new. Usually, the effects of closing a credit card are short-term; however, it may be better to keep an account open if you’re able.