Should I cancel my credit card? (2024)

If you find yourself collecting old credit cards that you don’t use anymore, you may be tempted to cancel them. After all, streamlining your financial life has real benefits.

But the decision to close a credit card can impact your credit scores, both immediately and in the longer term. When evaluating when to cancel a credit card, think through the possible consequences and explore other options before jumping to close your account.

The pros and cons of canceling an unused credit card

Closing a credit card might make sense for your financial situation, but be sure you understand the potential disadvantages. Pros and cons of closing an unused credit card include:

Pros

• Avoid mistakes. If you aren’t regularly using a credit card, you may be more likely to forget to pay the annual fee or miss something that could end up costing you money and actually damaging your credit. By closing the card yourself, rather than having the issuer do it for you, you’re in control.
• Save money. If your credit card charges an annual fee and you aren’t using the card enough to justify it, cutting that expense can be a good call. If the annual fee is your only concern, you can ask the issuer about switching to a card that doesn’t charge an annual fee.
• Avoid debt. If you’re worried you might run up a balance on your unused card, canceling it can help you avoid interest charges.

Cons

• Could increase your credit utilization ratio. Let’s say your total credit limit is $10,000 across all of your credit lines, and your balances total up to $2,000. That would put your utilization ratio at 20%. If you closed a credit card with a $2,000 credit limit, your utilization ratio would jump to 25% if you have the same $2,000 balance. In general, you should aim for a credit utilization ratio of 30% or lower. A higher ratio could mean lower credit scores.
• Could decrease your average account age. Closing your card won’t have an immediate impact on the average age of your credit accounts, but it can make a significant difference over time. When you close a credit card in good standing, the account stays on your credit report for up to 10 years, meaning the age of the closed account will still contribute to your average age of accounts. The length of your credit history makes up 15% of your FICO score, so letting your oldest accounts continue to age can improve your credit.
• Could forfeit rewards. If you close a credit card, you could lose any unredeemed rewards that are attached to that account. At a bare minimum, make sure you understand your card’s reward policies so you can redeem or transfer your rewards before or soon after closing, if necessary.

How to cancel an unused credit card

If you decide canceling a credit card is the best decision for your finances, you can call the number on the back of your card and ask to speak to a customer service representative.

They may read you some disclosures and remind you to update your payment method for any recurring charges billed to the card.

Some issuers may let you close a credit card online, but when in doubt, a phone call is the way to go.

When should you cancel an unused credit card?

The best time to cancel an unused credit card depends on the card you’re talking about.

If your card charges an annual fee, consider waiting until a month or two before your fee gets charged so you can get close to a full year of rewards and benefits. If your card has specific benefits such as annual travel credits or hotel free night awards, try and use those before closing your card.

Another thing to keep in mind is your card’s fine print. Depending on the terms you agreed to when you opened the card, closing it before a year is up may lead the issuer to claw back your welcome bonus and even cancel other cards.

What to do before canceling your credit card

Before you close your credit card, there are a few steps you can take to maximize the card’s value and minimize the impact on your credit score.

• Pay off any card balance. If you close an account that still has a balance, you could keep racking up interest charges and fees. Paying off your balance before closing an account can simplify the process.
• Change payment method for recurring charges. If you use your card to make automatic payments for bills, streaming services or other charges, you’ll need to update your payment method.
• Ask to transfer your credit limit. If you have other credit cards open with the same issuer, ask if you can transfer some or all of your credit limit to your other cards. This can help keep down your credit utilization ratio when you close your card.
• Redeem rewards. Make sure you redeem or transfer any points and miles that are linked to your card account. If you earn points or miles on a hotel or airline co-branded credit card such as the Marriott Bonvoy Bountiful™ Credit Card*The information for the Marriott Bonvoy Bountiful™ Credit Card has been collected independently by CNN Underscored. The card details on this page have not been reviewed or provided by the card issuer. , those points are linked to your loyalty account, so you won’t lose them when you close the card. However, points such as Chase Ultimate Rewards® are linked to your credit card.
• Ask about retention offers. If you’re on the fence about closing your credit card, it never hurts to call the bank and ask if there are any retention offers available on your account. Card issuers spend a lot of money acquiring new customers, and they may be willing to spend a bit more to avoid losing them. The issuer might offer to waive the annual fee for a year (which is a great excuse to keep the card open), or offer bonus points, either directly or if you spend a certain amount. You’ll have to do the math on how many points you would need to justify paying another year’s annual fee, but it’s always worth asking.