When to Cut Up a Credit Card & How to Dispose of One

There are several situations when you should cancel a credit card, such as when you have an unused card with an annual fee or you have too many cards to handle. The best time to cancel a credit card account is when you won't need the best possible credit score for anything important in the coming months. You can learn more about when it makes sense to close a credit card account below.

When to Cancel a Credit Card

1. When a Card You Don't Use Has an Annual Fee.
   Paying annual fees for an unused product doesn't make much sense. So if you're paying for a card you no longer use, first call the issuer to see if they'll waive the fee. This works more often than you might think.If asking for a fee waiver doesn't work, you may want to close the account, assuming you won't need the highest credit score possible in the next 6-12 months. Sometimes, it's better to just bite the bullet, especially since there are many ways that you can improve your credit standing to compensate.
2. When You Simply Have Too Many Cards.
   With new promotional offers cropping up on a regular basis, it can be tempting to open a new credit card every so often. But at the same time, you don't want to end up with a million different cards or all the mail, due dates and fraud concerns that could come along with them. The best way to keep your credit card arsenal manageable is to close the newest cards you no longer use.
3. If You're Not Planning a Big Loan.
   When you apply for a mortgage, car loan or other big loan, you want your credit score to be as high as possible to have the best shot at approval and low rates. Therefore, it's not a good idea to close a credit card right before applying because it can hurt your credit score and thus reduce your chances of approval or cost you money.
4. During Divorce Proceedings.
   Figuring out what to do with a shared credit card account when a relationship comes to an end can be difficult. Closing the account in question tends to be the answer if the couple applied for it together, as opposed to one person making the other an authorized user. When there's an authorized user, either person can simply remove the authorized user from the account, and the main accountholder can keep using his or her card. Continuing to use a joint account, on the other hand, will only lead to arguments over who owes what. And that could easily result in missed payments and credit score damage.
5. As Part of a Debt Settlement/Management Agreement.
   

   It's common for credit card companies to reduce a credit card's spending limit, or to revoke purchasing privileges altogether, when the accountholder has not paid the bill in a long time. Many issuers also make closing the account a condition of debt settlement or debt management agreements. In this case, the decision to close the account is out of your hands.

6. If You're a Victim of Fraud.
   

   There's a technical difference between canceling a credit card and closing a credit card account entirely. Those terms are typically used interchangeably, but you can actually cancel a card without completely shutting down your account.Say you lose your card or someone gets ahold of your account information and begins racking up charges. Your credit card company could simply cancel the affected card and issue a replacement with a new number, expiration date and CVV code. Doing so will not affect how the account is listed on your credit reports, which means you won't lose any credit history as a result.

You can't cancel an activated credit card before the annual fee is charged.

Once you get a card and activate it, the first annual fee is automatically subtracted from your limit, so you have to pay it to get your whole credit limit.

As far as subsequent annual fees go, if your balance is 0, then yeah nothing can hold you back from it. Just be prepared for your score to go down a bit once the card is reported as closed.

It is better to keep unused credit cards open than to cancel them because even unused credit cards with a $0 balance will still report positive information to the credit bureaus each month. It is especially worthwhile to keep an unused credit card open when the account does not have an annual fee.

Still, there are times when it may be beneficial to close your credit cards, such as to avoid expensive annual fees. And if you're worried about your credit score, you can use WalletHub's free credit score simulator to see the potential impact closing a credit card will have

Why It Is Better to Keep Unused Credit Cards

Just keeping unused credit cards open helps your credit by maintaining the total amount of credit you have available and preserving the length of your credit history. If you don't use a credit card, your account will still get reported to the credit bureaus as being in good standing every month, assuming you have a $0 balance. This will continue to add positive information to your credit reports, helping your credit score.

On the other hand, when you close a credit card, especially if it's one of your oldest credit accounts or one that has a high credit limit, your credit score will likely suffer a bit.

When It Is Better to Cancel Credit Cards

Despite the potential for credit score damage, it's important to remember that there are a few situations when it might be better to close unused credit cards rather than leave them open. If your unused credit card charges an annual fee, for example, and you don't need your credit score in its best shape for a while, it's probably best to save the annual fee and close the account.

On the other hand, if you want to cancel your credit card because you are concerned about overspending, try locking it away in a safe place first. If that doesn't work, it will likely work out better for you and your financial future to close the credit card account, even if your credit score takes a hit. 

The short answer is that nothing is likely to happen if you don't use your credit card for a few months. Not using your card could actually help your credit score if you have a $0 balance when you stop (contrary to some common myths about keeping a small credit card balance being beneficial).

The longer answer is that exactly what happens if you don't use your credit card depends on which card you have. Some rewards cards will revoke any unredeemed points, miles or cash back you have saved up if you don't use your credit card at all for a certain period of time – usually around 12 months. And if you don't use your credit card for 6 months or more, the issuer could close your account. But there's no standard timeframe for when a credit card issuer will decide to close an account due to inactivity.

Having your account closed due to inactivity could hurt your credit standing and possibly make it seem like your credit history is shorter than it really is. However, you will not be charged any sort of inactivity fee by your credit card company if you don't use your card to make purchases or other types of transactions for a prolonged period of time. Credit card inactivity fees are banned by law.

As a result, not using your credit card (at least not regularly) can be a great strategy if you want to build credit but are worried about overspending. You just have to make sure your balance is $0 when you stop using your card. A credit card with no balance will get reported to the credit bureaus as being in good standing each month, with an on-time payment and 0% credit utilization. That in turn will lead to credit score improvement if you manage the rest of your finances responsibly.

For your convenience, we'll summarize the key points to remember below.

Here's what happens if you don't use your credit card:

• Nothing is likely to happen if you don't use your credit card for a few months, as long as you make bill payments for any recurring monthly charges.
• The credit card's issuer may decide to close your account after a long period of inactivity. There is no standard timeframe, but they will often send a notice in advance and give you a chance to use your card first.
• Some credit card rewards will expire after a certain period of account inactivity. You'll also lose any rewards you've yet to redeem when your account is closed.
• If the credit card you're not using has a $0 balance and is in good standing, positive information will be added to your credit reports each month the account stays open.
• Unpaid balances from before you stopped using the card will continue to accrue interest. If your balances have been paid in full, you won't have to send in any new payments.
• If your credit card charges an annual fee, not using the card won't get you out of having to pay. And if you're not getting anything out of a card that you're paying for, you might want to close it.

The bottom line is that not using your card can still be good for your credit. And it's far better than using your card irresponsibly. So if you don't trust yourself to limit your spending, it may be wise to set your card aside until you have a necessary expense.

You should not attempt to destroy metal credit cards. If you request a replacement card or decide to close your account, the credit card company will likely send you a slip in which to return your old metal card when it mails you a new one. Or, they'll just ask you to mail the old metal card to a particular address, without providing an envelope or any such supporting materials. The issuer will then dispose of the card safely.

Procedures vary by credit card company. So you should call your card's customer service department to see how it recommends dealing with an unused metal credit card.

You definitely don't want to take a knife to a metal credit card or try to put such a card through a shredder. That's a recipe for a broken tool and perhaps a trip to the hospital. With that in mind, the bottom line is: Let credit card companies destroy metal credit cards so you don't have to.

There is no need to destroy your American Express Platinum card. Simply return the American Express Platinum card to American Express instead. Amex launched its own credit card recycling program in 2020 to ensure that customers' expired and defective cards are disposed of properly. Call customer service at (800) 528-4800, whether you are requesting a replacement card or closing the account, and American Express will either send a return envelope or provide an address where you can send the old card.

You should not try to destroy an American Express Platinum card on your own. The American Express Platinum card is made of stainless steel and is no match for a pair of kitchen scissors or a document shredder. So, rather than risk damage to your household equipment and possible personal injury, it makes more sense to go the safer route and let American Express dispose of your old American Express Platinum card.

Closing a credit card with zero balance is not a good idea if that card has no annual fee. Any credit card you manage responsibly, even an unused one, reflects positively on your credit history. So closing such a card will have a negative impact on your credit standing. But it can be worth it if your card is costly or if you're worried about falling victim to fraud while you're not keeping a close eye on it.

Here are the arguments against closing a credit card with zero balance:

1. Average account age suffers. This makes up at least 15% of your overall credit rating, so shortening it can hurt. Here's a quick example: Imagine you have three credit card accounts, which have been open for 3 years, 5 years and 10 years, respectively. The average account age is 6 years. If you close the 10-year-old account, the age of your average account falls to 4 years. Older accounts are better for your score because a long track record of responsibility tells issuers you're likely to behave the same way in the future.
2. Utilization increases. “Utilization,” or how much of your credit line you use, is important to your score. Creditors care about both your utilization on individual cards and your total utilization. Generally, the lower each is, the better. And closing an account with zero balance will increase your total utilization.Let's say you have three credit cards, each with a $1,000 credit line. You use 0% of one and 25% of the other two. Overall, that's 16.7% utilization. But if you cancel the unused card, it jumps to 25%. That's troublesome because credit score damage typically worsens if your utilization rises above 30%, and you'd be close to that milestone.

So closing an account will be a blow to your credit. You can improve your score afterward by paying on time with your remaining account(s). But it's usually best to just keep accounts open and avoid the damage entirely. There are a few exceptions, though.

Here's when to close a credit card with zero balance:

• It has an expensive annual fee.
• You're worried about fraud and won't be monitoring the card as closely. All credit cards give you a $0 fraud liability guarantee, but you might not want to count on the issuer to flag every fraudulent charge on its own.
• Keeping it open becomes a hassle, for one reason or another.

By the way, in case you're wondering, it is possible to close a credit card that has a balance. But you'll still be responsible for paying and will continue to accrue interest until the balance is fully paid off, even after the account is closed. You just won't be able to make any new purchases.

If you'd like to monitor how your credit changes after you've closed an account, you can track your credit report and score for free on WalletHub, the only site where reports and scores update daily.

Closing a credit card with a balance is possible, and it can be beneficial when a credit card company changes your account's terms for the worse, such as raising the annual fee or APR. It can also be a good idea to remove the credit card itself from the situation if you want to pay off the existing balance without the temptation to spend more. Closing a credit card doesn't cancel the balance owed, nor does it make the entire balance due immediately. You will have to continue making at least the minimum payment due each billing period until the balance is paid off. But closing the account will prevent you from making new purchases.

There are a lot of factors to weigh out when deciding whether or not closing a credit card account is the best idea, so it's wise not to do it in haste. Before you take action, consider what happens if you cancel a credit card with a balance.

Here's what happens when you close a credit card with a balance:

1. You will still owe your balance. You won't be forced to pay the balance on the closed account right away, but you must continue making at least the minimum payment due each billing period. Interest will still accrue, and the minimum amount due will steadily increase. Every card issuer will have different rules for this situation, and you may find information about it in your card's terms. If not, you should call customer service to find out as much as you can from your card issuer before agreeing to close the account. If you're thinking about closing the card so you can finally pay it off, consider a balance transfer, a payment plan with your card issuer, or a credit card consolidation loan.
2. Any rewards you have earned will likely be lost. Make sure to use any remaining rewards on your existing card, as they're likely to be forfeited when you close the account. Plus, it can't hurt to pay down a bit of your balance by redeeming for cash back.
3. It will affect your credit score. If the credit card is one of your oldest credit accounts, your average credit age will shorten. Your credit utilization could also go up if you have balances on other credit cards, too. Both of these will have a negative effect on your credit score. If you plan on applying for a loan or financing a big purchase anytime soon, check your credit score first to make sure you can afford to take a hit.

All in all, closing a card with a balance is rarely the best option. There are alternatives, but not all of them are available to people of every credit level – such as a good deal on a balance transfer credit card. If you're willing to endure a potential hit to your credit score in exchange for the long-term health of your finances, closing an account with a balance can be a way to get yourself on track. Just make sure you understand the repayment terms before you act. Closing a credit card with a balance does not get you out of paying that balance.

Whether or not you can reopen a closed credit card account depends on three things: 1) the card's issuer, 2) how long it's been since the account was closed, and 3) why it was closed. American Express and Chase and are among the major issuers that offer the possibility of reopening a closed account. Others, like Bank of America, Barclaycard, Citi and Discover, will not even consider it, though. For example, Discover's website notes, “You cannot reopen a card account once it has been closed. You will have to reapply for a new Discover Card.” The best way to find out if your card can be reopened is to call the issuer's customer service line. And you'd better act fast. In the cases where an issuer is willing to reopen an account, it typically can't have been closed for more than three to six months.

Here's how to reopen a closed credit card:

1. Call customer service. If you still have your card, the number is on the back. If not, it should be easily available online.
2. Provide your personal info. The issuer will need to find your old account in its records, so you'll need to give them information such as your name, Social Security Number and address.
3. Explain your situation. Tell the representative why your account closed and why you'd like to reopen it.
4. Authorize a credit pull, if necessary. The issuer may need to do a hard pull of your credit before it can approve the reopening of your account. This could lead to a temporary dip in your credit score, though. Avoiding that is one of the main reasons people are interested in reopening a closed account rather than applying for a new one.

Calling customer service definitely is a wise move if your account was closed due to inactivity (i.e. you didn't use your card for a long time). You may have luck if you say you'll start using it again. And if you voluntarily closed your own account and then changed your mind, you might be able to get it reopened, too.

But if your card was closed because you committed fraud or other illicit activities, you obviously won't be allowed to reopen it. Basically, anything that violates the card's terms and conditions results in permanent closing.