Closing Credit Cards: What You Need to Know Right Now

What happens when you close your credit cardsThinking of closing your credit cards? They can be HARD to give up. For many people, they’re a bit like a security blanket.

Still, some people want to close a single card for various reasons. Some want to close all their cards so they aren’t tempted any longer. Others just want their debt GONE!

That explains why some of the most commonly asked questions when people first start getting out of debt are:

  • Should I close my credit cards?
  • Does it hurt your credit to close a credit card?
  • What about cancelling my oldest credit card – is it true you should never do that?
  • How do you cancel a credit card?

I’ll answer all of those questions and more below.

But before I do, there’s one thing you need to know about closing credit cards. When your focus is on getting out of debt, you have to do what’s best for you.

So, should you close your credit cards?

Let’s start with this, especially if you’re wondering about the pros and cons of closing a credit card. The short answer is: it depends on your goals, your situation, and how you’re currently using them.

You know your situation best.

If you just want to close a single credit card because you hate the annual fee, read on to that section. But if you are in credit card debt and struggling to get out, chances are the answer is yes. Especially if you continue to add to their balance, despite your goal of paying them off.

(Unless you’re about to borrow for a big ticket item like a house. You typically shouldn’t open or close any accounts or make any major purchases or unusual transactions in that case.)

If you’re struggling with credit card debt, at a minimum you should consider cutting them up. And if the thought of even just cutting up your credit cards fills you with anxiety, that’s a sign that you really should consider doing so. (You can read more about cutting up credit cards here.)

Some people recommend freezing them in ice instead of cutting them up, but I don’t. (Here’s why I don’t think freezing your credit cards is a good idea.)

People commonly want to keep at least one card for emergencies, but you need family/friends and MONEY in an emergency. Credit cards are not money. They’re a means of payment that creates debt. So make building an emergency fund the priority if you don’t have a good sized one already.

Nail down your real goal first

Still using your the cards after cutting them up or freezing them? (You know, because you know the numbers or have them pre-populated online?) That’s a sign you should strongly consider closing your credit cards if you want to be debt free. (And you’re not about to borrow large amounts of money, like by getting a mortgage.)

Most people worry about the impact on their credit score of closing credit cards. That’s because they’ve been taught to hold their credit score in high regard so they can take out loans at lower interest rates. But if your goal is to get out of debt and stay out of debt forever, being able to borrow money at the best rates probably won’t matter all that much to you. (You know, since you don’t intend to borrow money again.)

If you’re going to be tempted to use your credit cards — even after you’ve cut them up — you’re probably better off just closing them altogether. You know yourself best.

If that’s the case for you, put your focus on actually getting out of debt. Stop stressing out about how closing credit cards might impact your credit score.

But does it hurt your credit to close a single credit card?

Usually at least a tiny bit. Closing a single credit card can hurt because the credit limit on that card is a factor in your score, and you’ll lose that impact. But I can tell you that closing one card of several generally just dings your score a little. (If you’ve got good or excellent credit.) That ding is usually temporary, so not typically anything to worry about.

Some exceptions would be:

  • if it’s your ONLY type of debt,
  • if it changes your credit utilization ratio for the worse,
  • or if you were right on the border between a good and not-so-good score.

Even then, the impact is usually temporary.

What about closing all your credit cards?

Closing ALL of your credit cards will likely hurt your credit more. It could hurt quite a bit, especially if any of the exceptions listed above apply to you. (For example, if they’re the only type of loan on your report — meaning you don’t have a car loan, student loan, mortgage, etc. on there too.)

However, there are plenty of good reasons for closing credit cards anyway, such as if…

  • You’re worried about possible identity theft issues.
  • You’re getting divorced and the cards are held jointly. (This is a biggie, because your ex could continue to use them otherwise.)
  • You got a notice that your interest rate will be increasing, and you want to opt out of the increase by the deadline.
  • You’ve learned that credit cards are not for you. (By carrying a balance, incurring late fees, drowning in debt, or experiencing other issues with them.)
  • You’re tired of annual fees or dealing with customer service issues.
  • Most importantly, you’re DONE with debt for good. (You probably already know that paying a ton of interest and being stuck in debt can hurt your wallet and ability to sleep.)

On a personal note, I cancelled all my credit cards back when my first husband and I got divorced, and didn’t reopen any again for years. While my score definitely went down a lot, it wasn’t permanent.

Closing all my credit cards was not the end of the world

I’m not one to monitor my credit score heavily — in fact the only times I usually saw my scores were when applying for a mortgage or a refinance (back when we still had debt) and they were always high.

But I checked mine now for this article and it’s 818 as of this moment:

Years after closing all my credit cards and then getting some again

I do use a couple of credit cards again now though, without ever carrying a balance. But I didn’t have any credit cards open for years prior to that, and we paid off all our debt years ago. (You can read our debt free story here.)

There are many people out there (like me) who’ve ended up closing all of their accounts at once due to things like divorce, and doing so is not the end of the world.

That’s because your credit score is based on your credit history — history which continues on as time goes by. Recent history counts for more than ancient history.

So remember that one thing and do what’s best for your situation, without being a slave to the credit industry.

About closing credit cards and your credit in general…

Closing them and then paying off debt could help your credit score too.

Also, you don’t just have one credit score. There are many scores that are used for various things — including multiple types of FICOs and the VantageScore. They’re all only snapshots in time; ones that are constantly changing.

More importantly, anything you do that’s related to debt or potential debt can have an impact on them. So if you’re afraid of closing a credit card, you should be afraid of the following things too:

  • Opening a credit card
  • Using a high percentage of your available credit limit
  • Paying late on a credit card
  • Having someone check your credit-worthiness with a hard inquiry
  • Applying for a card, or applying for a whole bunch of credit cards
  • and much more…

No one can tell you ahead of time exactly how doing any of those things will impact your credit score. Just remember that generally speaking, doing anything credit-related can change your score at least slightly, either positively OR negatively.

If you’re concerned about your credit…

If you’re concerned about your credit score overall, you may want to keep one revolving account (such as a credit card) open when possible. Or you could get a new one at some point in the future before the last revolving account you had in the past drops off your credit reports.

Dropping off your credit reports could take a while, because according to Equifax, “the account would stay on your…credit report for up to 10 years from the date it was reported by the lender as closed”. So you probably have some time before you’d need to be concerned about that.

Speaking of which, let’s debunk the common the “Never Close Your Oldest Credit Card” myth next.

Is cancelling my oldest credit card a bad idea?

You’ll often hear that you should never close your oldest credit card. Never is a strong word, and people are often mistaken about the reason behind keeping your oldest card open.

Nationally recognized credit expert John Ulzheimer discusses closing your oldest credit card in the video here. You can watch what he has to say, and I’ll summarize it the main points below too in case video isn’t your thing.

John explains that the myth is that “closing a credit card causes you to lose the value of the age of that card in your credit score, and that is absolutely not true.”

He adds:

“As long as the card is still on the credit report, not only does the credit scoring system still see the age of the card, but the card actually still continues to age, even when it’s closed.

So for example if you have an American Express card that you close today, it’s still going to be on your credit report, it’s still going to be considered in your score, the age of the card is still going to count, and a year from now that card is actually going to be a year older and all of that is going to still count.”

The bottom line? If you’re closing a single credit card, do so for other reasons like:

  • disliking it
  • getting rid of an annual fee
  • wanting to have fewer cards open
  • etc

John ends with this: “Don’t worry about the age of the card because it’s not a consideration you should focus on vis-à-vis your credit score and closing cards.”

Note: Don’t confuse leaving a card open with leaving debt on a card

You don’t have to keep carrying a balance on your credit cards just because they’re open. It’s OK to just cut them up and pay off the balance! (And you don’t have to carry a balance in order to improve your score.)

I repeat, you do not have to carry a balance. There’s no good reason to do that!

If you want to keep an unused credit card open and the company is threatening to close it if you don’t use it, you can always charge a tank of gas or something on it and then go right home and pay it off immediately so that you don’t build up a balance.

Finally, let’s end with this. How do you cancel a credit card?

How to cancel a credit card

Once you’ve decided to close a credit card, the right time to cancel it is usually whenever you feel like it. (Unless you’re planning to take out a mortgage in the next few months that does not use manual underwriting. In that case, you basically shouldn’t do anything that might negatively impact your credit scores.)

You can cancel a credit card even if it has a balance, so you don’t have to pay it off first. But if you can pay it off first, you probably should.

If you close a credit card when it still has a balance, your credit utilization rate will increase. (That’s not a good thing.) You will probably also lose any promotional interest rates, so the amount of interest you’re charged each month could go up.

So how do you cancel a credit card?

The steps to cancel a credit card are pretty simple:

  1. Cancel any recurring charges to the card
  2. Use any reward points associated with the card (unless you’ll be transferring those somewhere else)
  3. Cut up the card
  4. Pay the balance in full if possible
  5. Notify the credit card company’s customer service department that you’d like the card canceled at your request. You can do this on the phone by calling their customer service number, and then follow up with a letter. Keep a copy of any letters you send.
  6. Review your next statement to make sure the card is really closed.
  7. If you still have a balance, make on-time monthly payments until it is gone.
  8. The next time you review your credit reports, make sure the account shows as closed at customer request. (Be sure at least 2 months have passed first.)

I hope this guide on closing credit cards has been helpful. If you have additional questions, please leave them in the comments below and I’ll update it from time to time. And if you want to get out of debt, definitely fill out the form below!



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