If you want to close a credit card you no longer use, it’s important to do it the right way to avoid any negative impact on your credit score.
Here’s our five-step process for canceling a card the right way:
- Pay off your balance
- Use up any credit card rewards
- Call the credit card customer service to cancel
- Follow up with a letter
- Check your credit report to make sure it’s closed
Check out our step-by-step guide to closing an old card without hurting your score.
Step 1. Pay off your balance
The first thing you should do is pay off your balance.
It’s possible your credit card company might let you close the card with an existing balance, but they might hike up your interest rate or charge you fees for doing so.
To avoid this, make sure you take your balance down to zero.
Some people manage this by moving the balance to a new card—something called a balance transfer. Just know that these typically come with fees and other conditions, so research before you make a move.
Step 2. Use up any credit card rewards
You’ll also want to use up any rewards accumulated on your account, as some rewards are a “use it or lose it” thing, and canceling can mean forfeiting them.
Ask your credit card company how it handles rewards redemption prior to closing the account.
They might issue a statement with your rewards balance, so you can see how much you have to work with before you cancel.
Step 3. Call your credit card’s customer service to cancel
The next step is to cancel the card.
Most credit card companies want you to do this over the phone, although you may be able to initiate the process online.
To reach your credit card company, call its customer service department. Most card issuers list this number somewhere on your monthly statement, and you can also find it on the back of your card.
When you get a representative on the phone, it’s as easy as telling them you want to close your account.
Be prepared to answer some questions to confirm your identity, and you’ll also need your account number, so it helps to have a recent statement handy.
It’s also a good idea to have a pen and paper, so you can write down the name of the person you speak to, as well as their employee identification number if they have one. You should also mark down the date and time of your call, in case you need to reference it later.
While the rep may ask why you’re closing the account, you aren’t obligated to give a reason. In most cases, it’s easiest to simply say you no longer use the account.
Step 4. Follow up with a letter
Once you finish the call, confirm your cancellation in writing by sending a letter to the credit card company—this covers you in the event the customer service representative misplaces your information or makes a mistake with your cancellation request.
In your letter, make sure you include your name, address, contact number, and account number. You should also briefly summarize your call, including the date you called and the name and employee identification number of the person you spoke with.
If you paid off your balance, you can also include a copy of your final statement showing a zero balance.
Close by asking the credit card company to confirm in writing that it honored your request and canceled the account.
It’s best to send this letter via certified mail, so you have proof of its delivery.
Step 5. Check your credit report to make sure it’s closed
After you cancel your account, check your credit report to make sure it’s reported as closed.
Remember: just because you close an account doesn’t mean this information gets accurately reported by the credit bureaus.
If your credit report shows the account as still open, you should file a dispute to get it corrected.
Keep in mind that it can take a month or so for account information on your credit report to update.
Check out our guide for getting your free credit reports.
How canceling a credit card impacts your credit score
Before you cancel any credit card, it’s important to understand how it could affect your credit score.
Among the five factors that make up your credit score, credit utilization—the amount of total credit you have compared to how much you use—accounts for 30 percent.
You should aim to keep your credit utilization under 30 percent, as anything higher will have a negative impact on your credit score.
When you close an account, you shrink your amount of total available credit. This is why closing an account—or multiple accounts—can hurt your credit score.
To avoid any negative impact on your score, consider keeping your old accounts open, but with a zero balance.
You don’t have to use your credit card, but make sure you secure it or dispose of it properly—this reduces the risk of it falling into the hands of identity thieves.
5 tips for canceling your card
Canceling your credit card is a straightforward process, but there are some caveats to keep in mind.
1. Make sure you really want to cancel
Old cards with a zero balance can help your credit score by giving you more available credit, boosting your credit utilization rate.
Before you cancel, do the math and make sure closing an account won’t lower your credit score by depriving you of available credit.
2. Consider canceling cards with high fees and bad interest rates
On the other hand, some cards are too costly to keep open. For example, if a card has an annual fee or unfavorable interest rates, you’ll probably save money by closing it.
In some cases, you can negotiate a better interest rate by talking to the credit card company on the phone.
If you’re on the brink of canceling, they have an incentive to keep your business and so they may just lower your interest rate to keep you as a customer.
3. Keep other cards/accounts open
Closing all your credit cards at once can seriously damage your credit score.
Not only does it erase your payment history, but it also impacts your credit utilization.
Shutting down all your accounts simultaneously can also lower your score by erasing your credit history.
While many people see credit cards as a bad thing, using credit is actually important if you want to improve your credit score—the key is to use it responsibly. If you use credit the right way, it will increase your score.
The best part? You don’t have to carry a balance to do this.
In fact, charging a few purchases and paying them off each month is an excellent strategy for building good credit, as it shows creditors you can be trusted to pay your bills on time.
4. Don’t close the oldest card on your credit reports
If you can, avoid closing the oldest card listed on your credit report—this card is important for maintaining your credit history, which is how long you’ve used credit.
Because it accounts for 15 percent of your credit score, this factor can play a significant role in your credit score.
5. Don’t close multiple cards at once
If you shut down several cards at once, it can hurt your credit score by reducing your available credit.
Understandably, you might want to do a “clean up” of your credit report by purging cards you never use.
However, canceling them all at once can amplify the negative effect on your credit score by raising red flags for creditors.
If you need to close multiple cards, pace yourself by canceling one every few months or so—this way, you’re less likely to see your credit score drop.
Final thoughts
While it’s best to keep credit cards open if you can, some cards have high-interest rates or annual fees that make them too costly to keep active.
In that case, it’s okay to go ahead and cancel them.
By doing so carefully and methodically, you can minimize any negative effects on your credit score.
