is closing a credit card bad

The Truth about Closing a Credit Card

You might wonder if you need all those pieces of plastic in your wallet. Getting rid of a credit card might not seem like that big a deal logistically, but it has a few important implications for your credit score. Part of the process of deciding to cancel a credit card is first making sure it’s in your best interests to do so. If you simply don’t want to charge the card, consider keeping it open but not using it.


Deal with the Balance

If you try to terminate a credit card with an existing balance due, you will likely run into many issues. You should pay the balance on your credit card in full first, or you’ll likely suffer penalties and extra fees. If you don’t have sufficient cash on hand to pay off the account, consider transferring the existing balance to another card or account, preferably one with a lower interest rate.


Call – Then Follow Up

After you’ve dealt with any balance you owe, call the lender. Explain that you want to cancel your credit card and why. Follow up your request with a letter confirming what you said on the phone, restating your intentions in writing. Keep a copy of the letter for your records in case there’s a dispute.


Check Your Credit Report

Wait about month to allow your credit card company to communicate with the credit bureaus. Then, check your credit report to make sure the account is accurately reported as closed. It shouldn’t take more than a few weeks for the lender to report this activity. Then cut up your card. You’re done, unless your decision to terminate the account affects your credit score. In this case, you may have to live with your decision for a while.


Be Careful

Part of your score depends on how much of your available credit you’ve used – this is called your utilization ratio. This is the ratio of debt you to the amount of available credit. Both your overall credit used, as well as each individual credit card is considered when your score is calculated. When you pay off a credit card, it has a zero utilization rate – something that contributes positively to your score. If you terminate that card, its zero balance no longer helps your credit score.


Additionally, lenders look for a payment history of successful financing. So if the card you cancel is one you’ve held for a long period of time, you could effectively shave years off your credit performance.



About the Author
Beverly Bird has been writing professionally since 1983. She has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law.


This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc., an Experian company.   © 2014, Inc.  All rights reserved.