Whether you no longer want to pay an annual fee or want to reduce the number of credit cards you have in your wallet, sometimes it makes sense to cancel a credit card. Read on to learn more about why you may consider canceling a credit card, the steps involved and the potential impact on your credit.
Reasons to cancel a credit card
You might cancel a card for a number of reasons, including because you:
- No longer want to pay an annual fee: You might decide the annual fee outweighs the card’s benefits.
- Found a card that better suits your lifestyle: Different benefits might better fit your spending habits. For example, it might make more sense for you to have an airline credit card if you fly often.
- Want to simplify finances: You might want to reduce the number of credit accounts you manage.
Canceling your credit card
Before you cancel your card, make sure to check your transaction history for recurring transactions, such as utilities and subscriptions, and switch those to a new payment method. Check the terms of your card’s rewards program and find out how closing the account can affect your rewards. If you have to, use any points, miles or cash back before closing the account.
You can typically cancel your card by contacting the credit card issuer. Ask the representative to close your account. After closing the card, dispose of your physical credit cards by cutting them up or shredding them. Remember, if you have a balance on a card, you will still be responsible for paying it.
How canceling a credit card can affect your credit
Closing a credit card can impact your credit score. It may affect your:
Credit utilization ratio: This is the percentage of total available credit currently in use. Canceling a credit card reduces your total available credit, which can affect your credit utilization ratio.
Credit mix: Your credit mix is the different types of credit accounts you have. Canceling a credit card could affect your credit mix depending on the other types of credit accounts you have.
Length of credit history: Depending on how long you’ve had the card, canceling it may affect your length of credit history.
Alternatives to canceling a credit card
If you’re hesitant to close your card due to potential drawbacks, there are other strategies. You can simply reduce usage of the card while keeping it open. This can make sense if the card doesn’t come with an annual fee, particularly if it’s an older card – closing an older card could decrease the average age of your accounts and potentially impact your credit score. If the card no longer suits your needs, you can ask the card issuer to swap it to a different type of credit card that works better with your spending habits.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
