Thinking of Canceling Your Credit Cards? Think Again - NerdWallet
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Thinking of Canceling Your Credit Cards? Think Again

Thinking of Canceling Your Credit Cards? Think Again

Paying off a credit card is a big accomplishment. To celebrate, you might be planning to cancel your card and wash your hands of it for good. But slow down — there can be negative credit consequences.

Take a look at the Nerds’ analysis below before giving your plastic the ax.

Canceling a credit card can hurt your FICO score

The main reason canceling a credit card is harmful to your FICO score is because it can drive up your credit utilization ratio. Your credit utilization ratio is the amount of credit you have in use on your cards compared with the amount of credit you have available; it heavily influences the 30% of your FICO score determined by amounts owed. It’s best to keep your credit utilization ratio below 30% on all of your cards at all times.

When you cancel a credit card, you’re instantly eliminating a big chunk of available credit. This causes a jump in your credit utilization ratio, which can drag down your FICO score, especially if you’re carrying balances on other cards. Consequently, it’s usually better to keep cards open, particularly if they’re paid in full.

Canceling a credit card could eventually hurt your FICO score for reasons tied to length of credit history, if you’ve had the card for a long time. Although a closed credit card account with positive information will stay on your credit report for up to 10 years, unused accounts don’t have as much influence on your score as current accounts.

In other words, you won’t immediately lose a lot of credit history by closing an old card. But its beneficial effects on your score will wane over time before it ultimately drops off of your credit report altogether. This is another reason it’s smart to keep old credit cards open and active.

Nerd tip: If you’re no longer using your oldest credit card, you can keep it active by using it for a recurring payment. We suggest your gym membership or your Netflix account, but sign up to get monthly text or email alerts from your issuer when a payment is due. It can be easy to forget about an account you don’t use regularly.

Cancel carefully, if you must

FICO scores aside, the Nerds know there may be circumstances where you have to close a card. For example, if a card you’re not using is charging an annual fee, canceling might be the most cost-effective option. Alternatively, if you really can’t control your spending with credit cards, eliminating the temptation is probably best for your long-term financial health.

When you must cancel a card, follow these tips:

  • Make sure the card is completely paid off, including any lingering interest or fees.
  • Use up or cash out your rewards balance; in most cases, you’ll lose unused rewards if you cancel an account.
  • Call your issuer and explain that you need to cancel your account. Be ready for some pushback, and also listen carefully for other options. It might offer an alternative to canceling that you hadn’t considered.

Cards you’ll feel good about holding on to

The best cards to hold on to over the long haul are those that provide high, ongoing rewards and manageable annual fees. Here are a few of the Nerds’ favorite cards if you’re interested in making a long-term commitment:

The Chase Freedom®

Chase Freedom Credit Card
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With the Chase Freedom®, you’ll earn 5% cash back in rotating quarterly bonus categories (up to $1,500 spent per quarter). You’ll also earn unlimited 1% cash back on all other purchases. Historically, 5% bonus categories have included popular retailers like restaurants, grocery stores, Starbucks and

In terms of a signup bonus, you’ll Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening. Its annual fee is $0, making it a cost-effective option for years to come.

The Citi®Double Cash Card

Citibank Citi® Double Cash Card Credit Card
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The Citi®Double Cash Card earns cash back in a unique way. You’ll score 1% back when you make your purchases, then an additional 1% cash back when you pay them off. Also, there’s no limit to the rewards you can earn.

Like the Chase Freedom®, the Citi®Double Cash Card charges an annual fee of $0. Its perks make it another great choice for continuing use.

The Capital One® Quicksilver® Cash Rewards Credit Card

The Capital One® Quicksilver® Cash Rewards Credit Card earns 1.5% cash back on all purchases. There’s no limit to the rewards you can earn, and cash back can be redeemed in any amount.

It also comes with a signup bonus: One-time $100 bonus after you spend $500 on purchases within the first 3 months. Like our other picks, its annual fee is $0. It also charges no foreign transaction fees. In short, the Capital One® Quicksilver® Cash Rewards Credit Card is another solid deal for long-term swipers, so keep it on your radar.

Lindsay Konsko is a staff writer covering credit cards and consumer credit for NerdWallet. Follow her on Twitter @lkonsko and on Google+.

Image via iStock.

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  • Steven

    I like that you said “shit happens.”

    I had closed the page, but when I thought you swore I had to come back and double check

    I know this isn’t a family-oriented page (you have to be 18 to apply for credit) but I still respect your choice of words.

    Sometimes, no other word can really describe something as effectively as a “dirty” one.

  • Watashiwasls

    can paying off  car loan also ruin your ‘ratio’? I am about to pay off the last $800 of a $10,000 car loan, and am now concerned that doing so will lower my credit score – or are revolving credit and  installment loans considered differently?

    • Tim

      The ratio we speak of here only counts for revolving credit lines.

      • Phil


        I’ve had the Delta Skymiles AMEX for many years (over 10).  With the recent changes, I am thinking of switching to a different AMEX, probably the Costco.  Will this negatively impact my credit?  (Will I have been with AMEX for 10+ years once I switch – or with Costco AMEX for less than one year?)


        • Tim

          The length of your credit history takes all credit lines into account, not just open lines.

          So no matter what, your old account of 10+ years will continue to dominate your credit score, and opening a new account will have little to no impact. But in the past, I have also had success calling Amex’s customer service directly and switching cards, as you describe, which I believe keeps the account intact.

          I can’t vouch for whether Amex will treat it as such when they report it to the credit bureaus, but in either case there shouldn’t be any negative impact on your score.

          • Phil


  • nina

    what’s the difference between a store card eg. amazon, grocery store cards and credit cards. i have an amazon card which a chase visa card.

    • Tim

      The Amazon Visa is a standard credit card, so there’s no difference. Many stores, however, have credit cards that can only be used in their store.
      And even many retailers who have Visa/MasterCard versions of their cards use “instant approval” cards, so that you can sign up at the register. This means that these cards are more akin to subprime cards, and have high fees and rates.