How to Safely Close a Credit Card

There are times when it makes sense to close a credit card. This article will walk you through what to expect and how to close that credit card with minimal impact to your credit score.

How To Safely Close A Credit Card

By Jason Steele

Nothing lasts forever, including your relationship with your credit card issuer.

And when it’s time to close a credit card account, you want to make sure that you do it at the right time, and in the correct way so that it doesn’t negatively affect your credit. If you are wondering how to close a credit card with your credit card company, you came to the right place.

It’s smart to close a credit card when …

There are many reasons for closing credit card accounts, both good and bad.

High annual fee

One smart reason to close a credit card is that it simply isn’t worth its annual fee. There are numerous premium credit cards available with annual fees of around $100, and even a few luxury travel rewards cards with fees in the $450 to $600 range.

While paying these annual fees might have been worth it to you in the past, they may not still deliver the same value to you in light of your reduced travel or just changed travel or spending patterns.

Thankfully, there are plenty of types of credit cards available with no annual fee. These will be more basic products with fewer benefits and less generous rewards programs.

Credit card rewards

Another good reason to close a credit card is that you’ve found a better deal elsewhere. Much like the newest smartphone will become outdated within a few years, so will the latest rewards credit cards.

Card issuers are competing intensely with each other to offer you the most valuable rewards and benefits, and you might find that a once-competitive card no longer is. And if your credit has improved substantially since you received your credit card, you might qualify for a card with lower rates and fees, as well as better benefits.

Customer service

Then, there are issues of customer service. The credit card industry generally does a good job of keeping its customers happy, but there are always exceptions. If you’ve had negative experiences with your card issuer and you’re ready to move on, that’s certainly a good reason to close your account.

Should you close an unused card or keep it?

Many credit card users consider closing their account when they haven’t used it in a long time. Yet there are advantages and drawbacks to closing an unused account.

One advantage to closing the account is that you won’t have to pay an annual fee if there is one. Unless the card has valuable benefits, such as statement credits or access to airport business lounges, then there’s little reason to keep an unused credit card with an annual fee

On the other hand, having a credit card account open and in good standing will add positive information to your credit report. And if you never use that credit card, there’s no way to make a late payment or incur debt.

Think of it like someone who has a driver’s license, but doesn’t ever drive. That person will always have a perfect driving record as he or she won’t ever get in an accident or receive a traffic ticket.

Keeping your credit card account open will also continue to show that card’s available credit on your credit report. The more available credit that you have, the lower your debt to credit ratio will be, for a given amount of debt. Having a lower debt to credit ratio could help keep your credit score high.

Before closing credit cards, remember to take into account the payment history, outstanding credit card balance, interest rate, as well as any of the automatic payments set up on the card.

Also be aware that some credit card issuers will make the choice for you. Check your credit card terms and conditions or contact your credit card issuer to see whether they can close your account after a period of inactivity (meaning you haven't used the card in some number of months).

Which card to close when you have more than one

If you have multiple credit cards and you’re planning on closing an account, then you should close the one that offers the least value to you.

Consider the value of the card’s rewards and benefits. And if you tend to carry a balance on your credit cards, then it’s important to look at the card’s current interest rate for purchases.

Also, consider the card’s annual fee. When a card has a high annual fee and isn’t offering you benefits that you’re able to take advantage of, then this might be the best card to close.

Closing a credit card that has no annual fee should be the lowest priority.

How will closing a credit card affect my credit?

It’s a popular misconception that closing a credit card will help your credit.

Some believe that closing your oldest credit card will hurt your FICO credit score. This is based on the misbelief that somehow your closed account will no longer appear on your credit reports, which will reduce the age of your credit history.

However, closed accounts continue to appear on your credit reports, just like your open ones, so closing it will have no effect on this factor in your credit score.

How does closing a credit card affect my utilization rate?

One way that closing a credit card could hurt your credit score is by reducing the amount of credit you’ve been extended (also known as available credit), increasing your debt to credit ratio.

This effect is most pronounced when you have very few credit cards, when you have significant debt or when the card you’re closing represents a very high percentage of your available credit.

How long does a closed card account stay on my credit report?

When closing accounts in good standing, they will remain on your credit reports for 10 years. But if there has been a delinquency, that account will continue to appear on your credit reports for seven years following the first report of a late payment. This could cause a problem if you are looking to open a credit card with bad credit!

Can I close an account fraudulently opened in my name?

If you discover that you’ve been the victim of identity theft and an account has been fraudulently opened in your name, then you need to have that account removed from your credit report, not just closed.

Just as legitimately opened accounts will remain on your credit reports for years after you’ve closed them, fraudulently opened ones will too. And if there’s negative information on that account, it will hurt your credit score. Make sure to contact your card provider in order to confirm how to do it correctly.

Also, by asking for the account to be closed, you could be making a tacit acknowledgment that the account was actually opened by you. Instead of closing the account, you need to file a report with the Federal Trade Commission and dispute the account with the three major consumer credit bureaus, Equifax, Experian and TransUnion.

See related: What is a good APR on a credit card?

What steps are involved in closing my credit card?

  1. Contact your card issuer
    Once you’ve decided to close your credit card account, you simply have to call the card issuer and ask them to. Sometimes, this can be accomplished by a secured online message through your card issuer’s website or mobile app.

  2. Destroy your card (or return a metal one)
    Once the card issuer has agreed to close your account, you’ll be informed that you’ll need to destroy your remaining cards. You’ll also need to inform any authorized users that their card is invalid, and should be destroyed. If your card is made of metal, then the card issuer will mail you a return envelope to send it back and be destroyed.

  3. Update merchants who have your card on file
    You’ll also need to contact any billers who have your credit card on file, and ask them to remove that card from their account.

Can I close my credit card account if there’s a balance?

When you request to have a credit card account closed, it doesn’t actually close immediately. Instead, the account is deactivated, preventing you from making new charges.

If you have a balance on your account, you will still have to continue making payments according to the card’s terms, until the balance is paid off. One way to pay off your outstanding balance is to perform a balance transfer to a new card.

Will an unused card close automatically?

It depends on the card issuer. Many card issuers will close an account after a year of inactivity, but some will wait longer or won’t close it at all. If it’s important for you to keep an unused account open, be sure to use it to make at least one charge per year - and pay it off, of course!

Will the card issuer try to keep me?

When you call the card issuer to close your account, your call will often be transferred to a department called retention.

The goal of retention representatives who you’ll speak to is to convince you not to close your account. These representatives may offer you incentives to keep your account open.

For example, the card issuer may waive your annual fee, or give you some amount of points, miles or cash back in order to retain you as a customer. You may even be offered the opportunity to keep your account open, but switch to a card with a lower annual fee or none at all.

While it might be tempting to resist these offers and insist on closing your account, you may find one to be compelling enough to change your mind. If this happens, it can be a win-win for both you and the card issuer.

Will I be able to get a credit card with the same issuer later?

If you close your account in good standing, without defaulting on a debt, then the card issuer will most likely welcome you back whenever you choose to open a new account. However, some card issuers will not allow you to repeatedly receive a new account bonus for a card that you’ve had in the last few years.

Bottom line

Credit cards are never meant to be permanent relationships, and eventually you’ll probably want to close each one of your credit card accounts. By understanding how this process works, and the best way to accomplish it, you’ll be prepared for the next time you need to break up with one of your cards.

About the author

Jason Steele has been writing about credit cards and personal finance since 2008, poring through the terms and conditions of credit card agreements to understand the minutiae of how these products work. His work has appeared on Yahoo, MSN, HuffingtonPost and other major news outlets. In his free time, Jason’s a commercial pilot. He graduated from the University of Delaware with a degree in History. See Jason on Linkedin and Twitter.

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Written on June 10, 2021
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@self.inc.

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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