John Miller, Credit Cards Moderator
@john_miller
No, it’s not necessarily bad to cancel a credit card that has an annual fee, though it depends on each cardholder. To determine whether canceling a card with an annual fee can be bad for you, consider the following:
- Credit Score Impact: When closing a card, your credit score will take a hit because the average age of your open accounts decreases and your credit utilization increases (since you have less available credit).
- Timing: Your credit score should bounce back in a few months after canceling your card. So, if you don’t need the best score possible in the near future, then canceling the card won't affect you that much. Otherwise, it might be best to hang on to the card a while longer, especially if the annual fee has already been charged to your account.
- Rewards: If you cancel your card, any unused rewards will be lost. So, before closing the account, make sure to redeem your accrued rewards.
If you're still undecided, you can use WalletHub’s free credit score simulator tool, to estimate exactly how much closing a credit card will hurt your credit score.
Keep in mind that if the card has a balance, canceling it won’t absolve the debt. You’ll still be required to make payments until the balance is paid in full.
People also ask
How do you get a credit card annual fee waived?
You can get your credit card annual fee waived by getting a credit card that waives the annual fee during the first year as a promotion, or one with no annual fee at all. Alternatively, you can call the issuer’s retention line, but it is not guaranteed that it will work. Beyond that, you’re unlikely to get your credit card’s annual fee waived unless you’re an active-duty member of the military.
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Nothing is likely to happen if you don’t use your credit card for a few months. In fact, stopping with a $0 balance could actually help your credit score, despite the myth that keeping a small balance is better. Over a longer period, some rewards may expire and accounts could be closed, but you won’t be charged any fees for inactivity.
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