Credit · June 17, 2020

What You Need to Know Before Closing a Credit Card

There are plenty of reasons why you might want to close one of your credit cards. Maybe it has a low credit limit or high-interest rates, or you've moved on to newer cards with better rewards. While it's easy to shove that card in a drawer or cut it up, it's a trickier process to close a credit card without seeing negative effects.

There are some potential adverse impacts to closing a credit card, and you want to consider them carefully. Understanding the process will help you reduce any potential risks.


Caring for your credit score

While it's not inherently a bad choice, closing a card can have a negative impact on your credit score. Remember, just because an account is closed doesn't mean it disappears from your credit report. Most closed accounts will continue to appear for 7 to 10 years. If you have a history of late payments or a balance on this card, it'll still be in the report.

Making payments on time for a few months and paying off the balance before you close your card can help generate some positive payment history.

Closing a credit card can also impact your credit score by affecting your credit utilization ratio. This metric weighs your credit limits against your balances. Typically, experts gauge a good credit utilization ratio as under 30%. When you close a card, your ratio may actually become less favorable, because you don't have that available credit anymore. A high credit utilization ratio can have severe impacts on your overall score.

Paying off your balance before closing the card is important here, too—this way, even though you lose that available credit, you're not adding to your utilization either. You may also be able to limit the impact of closing a card by keeping your credit utilization across your other card accounts relatively low.

Something else to consider is the age of your credit card. Typically, the older an account, the better. So closing a very old card, especially if the rest of your cards are much newer, can initially impact your overall score. If you have an old card, you might want to consider using it sparingly and closing a newer card.

How to close a credit card

Once you've determined that closing your card is the right way to go, there are some simple steps you can take to get the process started.

1 Use any exclusive rewards

Typically, once you close your account with cards that offer rewards, those miles, points or cashback will disappear as well. Try to use as many of them as you can before you close the account.

2 Confirm your card's balance

Before you pay off your card, call your credit card company and confirm the amount you owe. Don't rely on paper or electronic statements, as there might be other charges in the system that haven't appeared yet.

3 Pay off your balance

Ideally, you want to pay your balance in full when before a credit card. Otherwise, the remaining amount could impact your credit score. If you do carry a balance, you'll still have to pay it off every month until it's zero.

4 Call customer service

Let a representative at your credit card company know you'd like to close the account. Ask for their name and confirm that you've paid off the balance. The customer service rep will try to entice you to keep your card, so just be ready to politely but firmly decline.

5 Send a written note

It never hurts to have written proof of your request. Create your request and send it as a certified letter so you can track it. In the note, include your name, address, the last four digits of your account, the date you called customer service and the name of the person you spoke with on the phone. Keep a copy for your records.

6 Complete administrative tasks

Don't forget to go through any bills or automatic payments you have for this particular card and switch the payment method. That way, you won't get hit with a late charge or a disruption in service. If you have a spouse or other family members who were using this card, make sure they aren't anymore.

7 Check your credit reports

After about a month, you can check your credit reports and confirm that the card account is reported as closed by you. Then, using scissors or a shredder, dispose of the card.

Consider before you close

Depending on the strength, length and variety of your credit history, closing a single card may not have very much impact on your credit score at all. But if you have a shorter history and not very many accounts, the effects could be more significant. Take a look at the entirety of your credit situation to determine—even if you're not using it often, it might make sense to keep an old card open a while longer.

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.