How to cancel a credit card
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Editor’s note: This post has been updated with new information.
Deciding whether to cancel a credit card isn’t a quick and easy decision — or at least it shouldn’t be. You need to weigh a number of factors to make sure that closing your account doesn’t have unintended consequences.
Knowing when to cancel a credit card (and when to keep an account open) is critical to your long-term success as a points and miles enthusiast. This knowledge is just as necessary as learning how to take advantage of attractive new credit card offers.
While it’s usually best to leave your credit cards open, if you have a reason for canceling a credit card (such as closing a joint account during a divorce or setting yourself up to potentially re-earn a sign-up bonus later), the process doesn’t have to be complicated. We outline everything you need to know below.
Should I cancel my credit card?
Before you close any credit card, it’s essential to ask the following questions:
- Will closing this card raise your credit utilization rate? Credit utilization describes the relationship between your credit card limits and balances. If closing a card causes your overall credit utilization to climb, your credit scores might decline. Lower credit scores could make it harder to qualify for new accounts and might lead to higher interest rates on new credit in the future.
- Has the account been open for more than one year? You should never close your credit card before the one-year mark. Card issuers aren’t fans of people who open credit cards just to score a sign-up bonus and don’t turn into valuable customers. American Express, in particular, may claw back your bonus or even close your account if it thinks you’re trying to game the system.
- Is there an annual fee on the account? If not, there’s usually little to no benefit to closing the account. On the other hand, keeping the card open might be suitable for your credit scores in the long run, especially if you manage the account responsibly.
- Can you downgrade to a no-annual-fee option? If you’re closing a credit card because you’re not getting enough value to offset the annual fee, consider asking the card issuer to downgrade your account. By downgrading your card to a different product — such as from the Capital One Venture Rewards Credit Card down to the Capital One VentureOne Rewards Credit Card with no annual fee — you might protect your credit. But know you’ll be taking a hit when it comes to card perks.
- Will the card issuer offer you a retention offer? Card issuers offer sign-up bonuses to attract new customers. Those same issuers may also be willing to extend a retention offer if you’re thinking about canceling a card due to its high annual fee. If a retention offer is available, it might make sense to keep a card you were intending on closing.
How to cancel a credit card
After all these considerations, if you’re still intent on canceling your credit card, here are all the steps you’ll need to take.
Plan your exit strategy
If you’ve gone through the list above and you still want to cancel your credit card, it’s time to plan your exit strategy. You should keep in mind two primary goals during this process — protect your credit score and protect your rewards. You don’t want to see your credit score spike by just canceling cards, and you don’t want to lose any points or miles you may have accumulated.
Check credit score impact
Closing a credit card won’t affect your length of credit history (worth 15% of your FICO Score) by lowering your average age of credit. Even after you close a positive account, it may remain on your credit for up to 10 years. Yet closing a credit card could raise your overall credit utilization rate and possibly lower your credit scores.
To mitigate potential credit score damage, you should make a plan to keep your credit utilization rate low even after you close the account. One option is to pay off all your credit cards before you close an account, especially the account you’re closing. To ensure the $0 balance is reported to the credit bureaus, it’s best to pay early — a few days before your statement closing date. If your overall credit utilization is already 0%, closing a card won’t change that figure.
Another option is to open another credit card (if you plan to do so) before you close your other account. Let’s say you plan to close a credit card with a $15,000 limit. If you open a new account and receive the same limit or a higher one, your utilization shouldn’t be impacted negatively. You will, however, have a new hard inquiry, and the new account itself may lower your average age of credit. These actions might result in lower credit scores, at least temporarily, so weigh these factors in making your decision.
Protect your rewards
Once you close a credit card, any rewards you leave sitting in that account could disappear. You may be able to redeem those points you’ve earned for travel and more. If you’re not ready to spend the points yet, you can transfer them to an airline or hotel partner, buy gift cards or redeem them for cash or statement credits. But be warned — you won’t get the most valuable redemptions with cash, statement credits or gift card purchases, only hitting a rate of 1 cent per point.
Pay the balance
If you’re a regular TPG reader, you know all about our 10 commandments for travel rewards credit cards. As such, this particular step should be easy since you’ve already been paying off your balances every month, so you’re getting the maximum benefit from the points and miles you earn. Double-check to ensure your payment has been processed before canceling a card. Also, don’t forget to use any credits on your card, such as the up to $200 annual airline fee statement credit offered by The Platinum Card® from American Express (enrollment required).
Contact customer service
If you’re 100% certain you want to cancel a credit card, you’re ready to close your account officially. It’s now time to pick up the phone and give your card issuer a call. If your bank offers a “secure message center,” there’s a chance you may be able to close your account online. You can send a message asking to close a specific account, and your card issuer might handle the process electronically without you ever having to pick up the phone.
Summer Hull, TPG’s director of travel content, shares the following story about how she saved some time and canceled a credit card online: “I used the Citi Secure Message Center to close a card with less than 30 seconds of time invested on my end.
- First, I logged into my Citi online account.
- Then, I went into the account I wished to close.
- Next, I selected the Message Center highlighted in red below.
- I wrote a brief message asking to close my account ending in number XXXX.
“The next day, the account was closed, and I received a message back to that effect.” She explains that because she didn’t want any retention offers, nor did she want to downgrade to a different account, the online cancelation method worked well for her.
On the other hand, if you want to try to negotiate those sorts of things, you’re best served by contacting your card issuer the old-fashioned way — by phone. Check for the customer service phone number on the back of your card — and be prepared to be pitched for a retention offer. Once you make the request and the customer service agent has exhausted all attempts to keep your business, the card will be closed. Ensure the canceled card is removed from any automatic payments you may have set up, so you’re not hit with late fees or other payment penalties.
Check your credit report again
Once the card is closed, it’s always a good idea to recheck your credit report. By law, you are entitled to a full credit report from the three major credit bureaus — Experian, Equifax, and TransUnion — once a year for free. To get your complete reports, head on over to the annual credit report site and click the “Request your free credit reports” button. If you’ve already received your free yearly report, be prepared to pay up to $12.50 per report if you decide to check your credit report after closing down a credit card account.
Most times, canceling a card isn’t a good idea because of the credit score hit, especially if it’s one you’ve had for a long time. That card can remain on your credit report for up to 10 years, and you’ll also take a hit on your credit score. But by following the steps above, you can mitigate any effects on your credit score and report.
Additional reporting by Stella Shon and Benét J. Wilson.
Featured photo by Getty Images.
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