At a Glance

Canceling a credit card affects your credit score in multiple ways. Depending on factors like the credit utilization ratio of your other cards and the age of your account, canceling a card can either have a minor or major effect on the score. If you have no other cards near their limit, canceling a card could decrease the overall available limit for your other accounts, which could cause an increased utilization rate and affect your score negatively. Only 22% of Americans have a FICO score of 800 or greater, so you do not want to do something that could push your score down.

In this article, you’ll learn:

What does it mean to close a credit card?

Closing a credit card means canceling your account with a particular credit card issuer. When you close a credit card, the issuer will stop allowing you to use the card for purchases, and you will no longer be able to earn rewards or accrue interest on the account.

It’s important to consider the potential impact on your credit score before closing a credit card, especially if you plan on applying for a loan or another credit product soon. If you do decide to close a credit card, you should also make sure that you have paid off any outstanding balances and that you have a record of the closure.

Does closing a credit card hurt your credit score?

Closing a credit card can impact your credit score, as it will reduce the total amount of available credit and increase the amount of debt relative to that credit. This can increase your credit utilization ratio, which is a factor that affects your credit score. Additionally, if you have had the credit card for a long time, closing it can reduce the average age of your credit accounts and lower your credit score.

However, the impact of closing a credit card on your credit score can vary depending on your individual credit history and other factors.

Also, by closing older accounts, you will reduce accounts’ average age and increase recent inquiries. This again can have an adverse effect on the score. On the flip side, if the canceled card charges you high interest rates or involves annual fees, or it is a duplicate of another existing account, then getting rid of it may give you some much needed financial breathing room and be beneficial. In any case, understanding how to best manage all aspects of credit scoring should help you make an informed decision about canceling a card.

1. Higher credit utilization ratio

The credit utilization ratio calculates all your open accounts and how much you use your available credit lines. Specifically, closing a credit card reduces the denominator in this calculation, meaning that if you have used the same amount of revolving credit over two or more cards before closing one of them, the remaining available credit becomes “stretched” across the lower denominator and results in a higher credit utilization ratio.

Closing a credit card can be particularly disadvantageous in situations where an individual is applying for a loan or attempting to improve their overall financial health. When it happens an immediate numerical change occurs that can sometimes cause their application to be declined for appearing irresponsible with their finances.

Related: How to lower your credit utilization ratio?

2. Decrease in length of credit history

When you close a credit card, you are immediately erasing the amount of time that account was active from your credit history. The longer your accounts have been opened and maintained, the better it looks to lenders and creditors when establishing loan eligibility in the future. That is why closing a card too early will diminish the overall time frame of your previous accounts as far as citations and references go. Essentially, you can be rewarded with better terms and conditions from lenders based on the reachable amount of experience you share with their business, so losing years of prominent activity is not ideal.

When does closing your credit card make sense?

Sometimes closing a credit card can be beneficial for your overall financial health. For example, if you find yourself constantly spending and charging more than you can pay, it may make sense to close the credit card to limit your ability to accumulate debt. Or, if you have low utilization on your existing cards and open a new one with better rewards or perks, it may make sense to close an old credit line to not over-saturate your credit report. Whatever the scenario, it is important to think carefully before closing any of your already established lines of credit.

1. The card has a high annual fee

If the card provides significant benefits or rewards that outweigh the annual fee, it may be worth keeping it. However, if the benefits do not justify the annual fee and you have other credit cards that meet your needs, it may make sense to close the card to avoid paying the fee. You may be able to downgrade a high annual fee credit card to a no-annual-fee card with the same issuer to avoid paying the annual fee while keeping your credit history and credit limit intact. Downgrading to a no-annual-fee card with the same issuer generally does not result in a hard inquiry or a significant impact on your credit score, unlike closing the account.

2. Your card has high interest rate

It might make sense to close a credit card with a high interest rate. It is understandable that you do not want to pay extra money if you don’t have to, but it might not necessarily be the best option.

If you have a high balance on your high-interest credit card, consider transferring the balance to a new credit card with a lower interest rate or a 0% introductory rate. You may be able to negotiate with your credit card issuer to lower your interest rate. This is especially true if you have a good payment history and a high credit score.

If you can pay off the balance quickly, you may not have to worry about the high interest rate. Once the balance is paid off, you can stop using the card and keep it open if you want to maintain your credit history. You can also consider using the card only for small purchases that you can pay off quickly. This way, you can avoid accumulating high-interest debt while keeping the card open.

3. You struggle with overspending

If you are having difficulty controlling your spending and don’t want it to affect your credit, it may be a good idea to consider closing your credit card. Closing the account will not only prevent any further temptations of overspending but can also help safeguard your credit history.

4. You are upgrading your card

Upgrading your credit card can often be beneficial, but it is important to understand exactly what this means for your current account. Depending on your provider, upgrading could mean that you will still have the same account and it will be upgraded with a new credit limit or rewards program, or it could mean that you will have an entirely new card. In general, upgrading does not mean that your current account will close. However, researching your options or talking to a customer service representative may help you further understand how your specific provider handles upgrades.

4. Divorce or separation

Divorce or separation can be an incredibly difficult period in someone’s life. One of the many practicalities one must consider is financially separating oneself from their former partner. Closing a shared credit card can be a necessary step in this process, as it can help protect both parties from the potential for fraudulent activity and lingering debt obligations.

Doing so is also important to mitigate any disputes that may arise while divvying up joint assets during the divorce. In some cases, it may even be wise to close individual cards you each held before the marriage.

Related: Does divorce affect credit score?

When should you not cancel a credit card?

Canceling a credit card should not be done on a whim. Most people do not realize the long-term impact that this action can have on their credit score. It is beneficial to keep older cards with positive payment histories open even if you do not use them often.

1. It’s the oldest account on your report

Keeping your oldest credit card active and in good standing can have many benefits to help build and improve your credit score. Having a longer history of responsible borrowing is good for your overall credit score. If you close an active credit card, it can remain on your report for up to 10 years, but the older it is, the less impact closing it will have on your history. Also, many lenders consider the age of your oldest account when considering an application for new lines of credit. They look favorably if you have a longer history of responsible credit use.

2. You feel like closing the card only because you don’t use it often

If you’re considering closing a credit card you don’t use very frequently, ask yourself if you really need to do so. It’s important to consider the potential impact on your credit score and the available benefits of keeping that account open before making a decision. Using this card sparingly can be beneficial even if you feel like it’s redundant right now.

3. You don’t have many other accounts open

Closing a credit card may seem like a good way to save money, but doing so when you don’t have many other accounts open can actually be detrimental in the long run. By closing the account, your available credit is reduced, and keeping an account open can help balance any new debt or recent changes to your credit profile. It’s smart to think twice about closing a particular card, given that there might not be enough total accounts to replace its value on your credit report.

How can you safely close a credit card?

Here are some steps you can follow to safely close a credit card:

  1. Pay off any outstanding balances: Before closing a credit card, make sure to pay off any outstanding balances in full, as having a balance when you close a credit card can negatively impact your credit score.
  2. Consider alternative options: Before closing a credit card, consider alternative options such as reducing the credit limit or converting the card to a different type of account, as these options may have a less negative impact on your credit score.
  3. Check for automatic payments: If you have automatic payments on the credit card, cancel or change them to a different payment method before closing the account.
  4. Keep a record of the closure: After closing the credit card, keep a record of the closure, including the date and any communication with the issuer. This can help in the event of any disputes or errors.
  5. Monitor your credit report: After closing a credit card, monitor your credit report to ensure that the account closure is accurately reflected and that your credit score is not negatively impacted.


There is no specific time frame when you should wait to close a credit card. The timing of when you close a credit card will depend on your individual financial situation and goals.

There can be benefits to closing a credit card, but it is important to carefully consider the potential impact on your credit score and overall financial situation before doing so. Here are some of the benefits of closing a credit card:

  • Reducing temptation to spend: Closing a credit card can help reduce the temptation to make unnecessary purchases, which can be especially helpful for people who have trouble managing their spending.
  • Simplifying your finances: Closing a credit card can simplify your finances by reducing the number of accounts you need to manage and making it easier to keep track of your spending and payments.
  • Avoiding annual fees: If you have a credit card with an annual fee and are not taking advantage of its benefits, closing the card can save you money in fees.

There is no one-size-fits-all answer to how many credit cards are good to have, as the ideal number of credit cards for you will depend on your individual financial situation and goals. However, here are some general guidelines to help you determine the right number of credit cards for you:

  • Use credit cards to build credit: Having one or two credit cards and using them responsibly can help you build a positive credit history and improve your credit score.
  • Keep your credit utilization low: Your credit utilization ratio, which is the amount of credit you are using relative to the total amount of credit you have available, is a factor that affects your credit score. Keeping your credit utilization low, ideally below 30%, can help maintain a good credit score.
  • Consider your spending habits: The number of credit cards you have should depend on your spending habits and your ability to manage multiple accounts. If you find it difficult to keep track of multiple credit cards, it may be better to stick with just one or two.
  • Take advantage of rewards: If you are someone who regularly uses credit cards to make purchases, having multiple cards can allow you to take advantage of different rewards programs and earn more rewards.

Related: Do more credit cards help your credit score?

Yes, you can close your credit card at any time. However, you should be aware that the timing of when you close a credit card can impact the effect on your credit score.