Is It Bad to Close a Credit Card? How Closing Affects Your Score

Independent guide - not affiliated with or endorsed by any card issuer, credit bureau or scoring company. Each issuer has its own process for closing an account; follow the instructions in your official app or on the number printed on your card.

Closing a credit card is not automatically bad, but it can lower your credit score. The main risk is that you lose that card's credit limit, so the balances on your other cards take up a bigger share of your available credit. The CFPB's answer is that it depends on your situation, and that you should not assume closing a card will improve your score.

Sometimes closing a card is the right call: an annual fee you no longer get value from, a card that tempts you into debt, or a joint account after a separation. This guide explains exactly how closing affects your credit, when it makes sense, the alternatives, and how to close a card cleanly. It is written for US readers and draws on CFPB and FICO consumer guidance.

How closing a card affects your credit score

Two parts of your credit profile are affected when you close a card.

1. Credit utilisation

Utilisation is the share of your available revolving credit that you are using. The CFPB explains that closing a card can raise your utilisation ratio, which can lower your score. Here is the arithmetic with simple illustrative numbers: if you have two cards with equal limits and a balance on one, closing the unused card doubles your utilisation overnight, even though you have not spent anything more. If you pay every card in full and your reported balances are tiny, the effect may be small. If you carry balances, it can be noticeable. Our guide to credit utilisation explains why lower is better.

2. Length of credit history

The CFPB notes that keeping an old account open with a good payment history may help maintain a higher score. A closed account in good standing does not vanish from your report straight away; it typically remains on your credit report for years and can keep contributing history while it is there. Over the long run, though, closing your oldest card can shorten the history that scoring models see.

The CFPB also points out that any change may be minor or temporary, and that the full effect depends on the rest of your credit profile. Someone with many accounts, long history and low balances will often see little change. Someone with one or two cards will usually feel it more.

When closing a card makes sense

The CFPB lists several situations where closing a card can be a good financial step:

• The annual fee or terms outweigh the benefits. If you pay a fee for perks you no longer use, keeping the card is costing you money.
• The card tempts you into debt you cannot pay off. Protecting your budget matters more than a few score points.
• You are not planning to apply for credit soon. A temporary dip matters less if you are not about to apply for a mortgage, car loan or new card.

Other common reasons include closing a joint card after a divorce or separation, or reducing the number of accounts you have to monitor for fraud.

When to keep the card open

• It has no annual fee and you can use it occasionally without overspending.
• It is your oldest account, and especially if your other accounts are young.
• You carry balances on other cards, so losing the limit would push up your utilisation.
• You plan to apply for a mortgage or loan in the coming months. Avoid any changes to your credit profile shortly before a big application, just as you would avoid new applications. Our guide on whether applying for a card hurts your score covers the timing.

If you keep an unused card, the CFPB suggests checking your statements for signs of identity theft and unexpected fees.

Alternatives to closing

Ask for a product change

Many issuers let you switch an annual-fee card to a no-fee card from the same family. Because the account stays open, your history and, usually, your limit carry over. Ask the issuer what options it offers; not every card has one. Our no annual fee rankings show what a good fee-free card looks like.

Keep it in a drawer, with one small charge

Issuers can close accounts that go unused for a long time. Putting one small recurring charge on the card and paying it automatically keeps it active without temptation.

Lower the limit instead

If the issue is temptation, some issuers will reduce your limit on request. You keep the account age, though a lower limit has a similar, smaller effect on utilisation.

Can you close a card with a balance?

Usually, yes. Closing the account stops new purchases, but you still owe the balance and must keep making at least the minimum payment until it is paid off. The account terms you agreed to generally continue to apply to that balance. Do not stop paying just because the card is closed; a missed payment would hurt your credit far more than closing the card.

How to close a credit card the right way

1. Redeem your rewards first. Points and cash back are often forfeited when an account closes.
2. Move recurring charges such as subscriptions and utility bills to another card.
3. Pay the balance to zero, or plan how you will pay it after closing.
4. Contact the issuer through the official app or the number on your card and ask to close the account. Ask whether any annual fee recently charged can be refunded.
5. Get written confirmation that the account is closed at your request.
6. Check your credit report after a couple of months to confirm it shows the account as closed by the consumer, with the correct balance.

What if the issuer closes your card?

Issuers can close accounts, for example after long inactivity or a change in your credit profile. The effect on your score is the same as if you closed it: the limit disappears from your utilisation. If you depend on a card you rarely use, keep it active. If you want to understand which score bands lenders look for when you replace it, see what credit score you need for a credit card.

Closing a card when you are an authorised user

If you are only an authorised user on someone else's card, you are not closing an account; you are asking to be removed from it. That has its own effects on your credit report, covered in our guide to authorized users.

Sources

• CFPB: Does it hurt my credit to close a credit card?
• CFPB: Understand your credit score
• CFPB: Credit score myths that might be holding you back
• myFICO: What's in my FICO Scores?