How to Cancel a Credit Card?

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. 

Yes, closing credit accounts can hurt your credit score in the short term, depending on how old the accounts are and how much other credit you have. But canceling a credit card account might also benefit your credit score in the long run if you manage the rest of your finances better as a result of having one fewer account to worry about.

You can estimate the effect of canceling a credit card on your credit score by using our credit score simulator. You can also check your latest credit score for free on WalletHub. You'll get daily updates as well as personalized advice.

Here's what happens to your credit score when you cancel a credit card:

• Credit score drops: Your credit score often goes down because the average age of your open accounts decreases and your overall utilization increases (since you have less available credit).
• Scores bounce back: Your credit score should rebound within 3-6 months of canceling your credit card account. Make sure to have at least one open credit card remaining and pay all your bills on time.
• What happens if you don't cancel: A credit card that is in good standing will continue to help your credit score. Even if you don't make purchases with it, it will still report positive information to the credit bureaus each month. This is definitely worth considering if your card does not charge an annual fee.
• Age matters: Closing newer accounts won't have as much of an impact as closing older ones.
• Limit matters: Closing low-limit accounts won't do as much damage as closing high-limit ones.
• When score drops matter: If you don't need the best score possible for the 3-6 months it usually takes credit scores to bounce back after credit card cancelation, the temporary drop shouldn't cost you anything.

Bottom Line: Avoid canceling your oldest card and your card with the highest credit limit. That will mitigate the amount of credit score damage. And if you have to close your oldest or highest-limit card, make sure you do it at a time when you don't need your credit score to be at its best.

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.

Yes, you can cancel a Credit One card before activating it. To cancel a Credit One credit card, before or after activating it, either call customer service at (877) 825-3242 or mail a written request to:

Credit One Bank
General Correspondence
P.O. Box 98873
Las Vegas, NV 89193-8873

Mailed requests take longer to process, and if you cancel by phone, the customer service rep may offer reduced fees or a lower interest rate as an incentive for you to keep the card. 

What you should know before cancelling a Credit One credit card

You should be aware that if you don't activate your card within 14 days after you receive it, Credit One will automatically close the new account. Similarly, once you're approved for a card, Credit One will report the new account to the major credit bureaus, regardless of whether you activate the card. So if you cancel a Credit One card before activating, the closed account will still appear on your credit report. 

Finally, if you cancel your Credit One card before you activate it, you won't be charged an annual fee, if one applies. You could still cancel and get a full refund after you activate the card, though, as long as you have not made a purchase on the account.

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.

To cancel a credit card transaction, contact either the merchant on the other side of the transaction or the credit card company. Which you should contact first depends on whether or not you think the transaction is fraudulent.

When You Think the Transaction Is Fraudulent:

If you want to cancel a credit card transaction because you think it is fraudulent, the first thing you should do is search online for the name of the biller, as listed on your credit card account. Sometimes, legitimate transactions can lead to false alarms simply because a biller's corporate name isn't as recognizable as the brand name a consumer really does intend to pay. If that clears things up in your case, great – crisis averted.

However, if you still don't recognize the details, you should definitely call your credit card's issuer (the number is listed on the back of your card) to inform them about the unauthorized transaction. Even if the issuer can't cancel the transaction before it goes through initially, you will not be on the hook for any fraudulent purchases made with your credit card account. All credit cards give users a $0 fraud liability guarantee.

When You Just Want to Cancel the Transaction:

If you know that a credit card transaction is legitimate, but you want to cancel it because you changed your mind or made the purchase by mistake (or any other reason), take your request directly to the merchant the transaction is with. The credit card company won't be able to do much about a legitimately authorized credit card transaction. They might be able to instruct you on how to cancel future transactions if the card is being used for a subscription or other recurring purchase, but that's about it.

Your chances of being able to cancel a credit card transaction made online figure to be especially good. Check the merchant's cancellation policy. Some provide a small window in which you can cancel a pending transaction. Just bear in mind that in this situation, an order may show as canceled before the transaction reversal posts to your credit card account.

Closing a secured credit card has the potential to hurt your score. But that's not because it's a secured card. You run the risk of a slight drop in your score when closing any credit card because it can make your credit history seem shorter and reduce the total amount of credit you have available. And the impact usually is most significant when you close your oldest account.

All else being equal, it's best to keep unused accounts open. But it's a slightly different story if you're paying an annual fee or leaving a deposit in the custody of your card's issuer. That's especially true if you don't need your credit score to be in top shape in the very near future. You don't want to waste money on something you never use, after all, or give your card's issuer an indefinite loan. And since secured cards typically don't pay interest on deposits, there are far better uses for your fee and deposit money in the long run. For example, if you placed a $200 deposit on a secured credit card in 2008 and never closed your account, that $200 would still be $200. But if you invested that money in an S&P 500 index fund, you'd have more than $600 today.

Of course, you'd need to use a secured card for a while to improve your credit score enough to qualify for an unsecured card. And if you consistently pay your secured card's bill on time, the issuer may offer to refund your security deposit. So it's important to weigh all the different variables before deciding whether or not to close a secured credit card. And that includes how soon you plan to apply for a mortgage, auto loan or other major financial commitment for which your credit will be checked. A bit of temporary credit score damage won't cost you if you don't try to borrow until your score rebounds.

Here's what you need to know about closing a secured credit card:

• If you close the card, your average account age decreases and your total credit utilization increases. This may lead to a temporary credit score drop.
• If you don't close the card, it will continue to report positive information to the credit bureaus each month, even if you don't use it and there's no balance.
• If your card charges an expensive annual fee, you may want to close it rather than pay every year for a card you're not using.
• When you close a secured credit card, you'll get your deposit back minus any outstanding balance.
• Some issuers will let you graduate to an unsecured card after consistent on-time payments. That means you'll get your deposit back and often receive better benefits on your card.

In all, closing a secured credit card might not be the greatest idea. But most secured card users do it at some point. And you can lessen the impact with good timing.

No, a balance transfer does not cancel a credit card. You are not required to close the account once a balance transfer is complete, either. It may actually be a good idea to keep your old credit card account open, even if you don't plan on using it. Closing a credit card account after a balance transfer could have a negative effect on your credit score.

When you close a credit card, it reduces your total available credit and drives up your utilization ratio. It's best to maintain a debt level of less than 30 percent of your total credit limit. Also, the average age of your accounts may decrease, particularly if you close a card that you've had for a long time. Potential lenders like to see a lengthy history of credit accounts when reviewing applications for additional credit. You can review some helpful tips on cancelling a credit card without hurting your score.

The exception to the rule, when it comes to cancelling a credit card after a balance transfer, is if the card has an annual fee. You could pay the fee once a year to keep the card active. Or, if you don't plan on using the card anymore, you may consider closing the account to save money.

If you're considering credit cards that cater well toward balance transfers, feel free to take a look at some of the best ones.

Yes, it is bad to cancel a credit card since it can negatively affect your credit score by impacting the amount of credit you have available, your credit utilization and the age of your credit history. The exact credit score impact varies by individual. You can estimate how canceling a credit card will affect your credit score by using WalletHub's free credit score simulator.

Reasons Why It Is Bad to Cancel a Credit Card

Overall credit goes down. When you cancel a credit card account, you no longer have access to the credit limit on that card, in turn reducing the total credit you have available between all your credit card accounts.

Credit utilization goes up. When your total credit limit goes down, your credit utilization goes up, assuming your spending stays the same. If you have a high credit utilization ratio, it signals to creditors and other lenders that you may have trouble affording more spending power.

Age of credit history drops. The age of your credit history matters for your credit score. Closing older credit card accounts will impact your score more than closing newer accounts.

Credit score will fall. High credit utilization and a short credit history are two things that can hurt your credit score after canceling a credit card. Your credit score won't drop as much if you don't close accounts that are the oldest or that have the highest credit limits.

Less positive credit information gets reported. A credit card account that's in good standing will relay positive information to the major credit bureaus each month, even if you don't use the card to make purchases. Closing the account will stop the flow of positive info.

Even though canceling a credit card is usually not recommended, there are still some instances where it may be necessary to cancel a credit card, like if the card has a high annual fee or if you have the tendency to overspend. You can check out the most common reasons for canceling a credit card to learn more.