Closing a credit card may sound simple — just call the bank and cancel, right?
But the truth is, if you don’t do it the right way, you can hurt your credit score, lose valuable rewards points, or even leave yourself vulnerable to unexpected fees.
That’s why it’s important to understand how to close a credit card the right way.
In this comprehensive guide, we’ll cover everything step by step so you can make a smart decision without damaging your financial health.
Table of Contents
1. Why Do People Close Credit Cards?
There are many reasons why someone might want to close a credit card. Let’s look at the most common ones:
a) High Annual Fees
Some premium cards charge $100–$600 per year. If you’re not getting enough rewards or benefits to offset the cost, it makes sense to consider closing it.
b) High Interest Rates
If a card has an APR above 25% and you carry balances, you might want to switch to a lower-interest option.
c) Too Many Cards to Manage
Managing multiple due dates, payments, and balances can be stressful. Some people close accounts to simplify finances.
d) Temptation to Overspend
For those struggling with financial discipline, closing a card can remove the temptation to use it recklessly.
e) Limited Rewards or Benefits
Older credit cards might not offer cashback, travel rewards, or perks that newer cards provide.
2. The Impact of Closing a Credit Card on Your Credit Score
Before you cancel, you should know how it affects your credit score.
Credit scores are determined by factors like:
- Payment history (35%) – whether you pay on time.
- Credit utilization (30%) – how much of your available credit you use.
- Length of credit history (15%) – how long you’ve had accounts open.
- New credit (10%) – recent credit inquiries.
- Credit mix (10%) – the variety of credit accounts.
How Closing a Card Can Hurt Your Score
- Reduced Credit Utilization
Example:- Total credit limit across all cards: $10,000
- Current balance: $2,000 → Utilization = 20%
If you close a card with a $5,000 limit, your total available credit drops to $5,000.
Utilization jumps to 40%, which lowers your score.
- Shortened Credit History
If you close one of your oldest cards, your average account age decreases, which can negatively impact your score. - Fewer Accounts = Less Credit Mix
Having multiple credit accounts is good for your credit profile. Closing one could reduce that benefit.
3. Things to Consider Before Closing a Credit Card
Instead of rushing, ask yourself these questions:
- Is the card one of my oldest accounts? (Better to keep it open.)
- Does the card have an annual fee I no longer want to pay?
- Do I carry a balance? (Closing the card won’t erase debt.)
- Am I planning to apply for a loan soon? (Closing a card before a mortgage or car loan could lower your score.)
4. Step-by-Step Guide to Closing a Credit Card the Right Way
Here’s how to do it properly:
Step 1: Pay Off the Balance
You cannot close a credit card that has an unpaid balance. Clear all pending payments first.
Step 2: Redeem Rewards
Use or transfer cashback, miles, or reward points before canceling. Some issuers wipe them out once you close.
Step 3: Stop Automatic Payments
If you’ve linked subscriptions like Netflix, Spotify, or utilities, switch them to another card to avoid missed payments.
Step 4: Call Customer Service
Contact the card issuer directly. Be polite and ask for confirmation of closure. Sometimes, they may offer you retention bonuses like extra rewards or waived fees to stay.
Step 5: Get Written Confirmation
Ask the issuer to send you an official closure letter or email. Keep it for your records in case of future billing errors.
Step 6: Check Your Credit Report
Within 30–60 days, check your credit report to confirm the card shows as “closed at consumer’s request.”
Step 7: Cut Up or Destroy the Card
Once confirmed, safely destroy the physical card to avoid fraud.
5. Alternatives to Closing a Credit Card
If you’re worried about your credit score, consider these options instead:
a) Downgrade to a No-Fee Version
Many issuers allow you to switch to a basic card without annual fees. This keeps your credit line active.
b) Keep It Open with Minimal Use
You can make a small purchase every few months and pay it off to keep the account active.
c) Negotiate Fees
Call the bank and ask for a fee waiver or reduced interest rate. They often try to retain good customers.
6. Common Mistakes People Make When Closing Credit Cards
- Closing their oldest card → Hurts credit history.
- Canceling right before applying for a loan → Lowers credit score at the worst time.
- Forgetting about rewards points → Losing money.
- Not updating recurring payments → Causes missed bills and late fees.
- Assuming debt disappears → You still owe any remaining balance even after closure.
7. FAQs on Closing Credit Cards
Q1. Does closing a credit card hurt my credit score?
Yes, it can — mainly due to higher utilization and shorter credit history.
Q2. Can I close a credit card with a balance?
No, you must pay it off first. Some issuers allow you to close it but will keep billing until the balance is cleared.
Q3. Should I close a card with an annual fee?
If the benefits don’t outweigh the cost, yes. But consider downgrading first.
Q4. Can I reopen a closed card?
Some issuers allow reopening within a few months, but not always.
Q5. How long does it take for the closure to reflect on my credit report?
Usually 30–60 days.
8. Final Thoughts
Closing a credit card is not always a bad idea — sometimes it’s the smartest financial move. But doing it the wrong way can hurt your credit score, cost you rewards, and create future hassles.