Closing a credit card: what it does to your credit, and how to do it

Does closing a credit card hurt your credit score?

It can. Closing a card removes its limit from your available credit, so the same balances take up a bigger share and utilization rises.

myFICO says closing a card can wipe out some of your available credit and push your overall utilization up, and your score may dip in response. It also says canceling a card won't improve your FICO Scores ^[1].

Experian's example: close an unused card with a $5,000 limit while you carry $2,000 on another card, and utilization goes from 20% to 40% ^[3]. If you're going to close a card, myFICO suggests getting your balances on other cards as low as you can first ^[1]. Run your own numbers in the credit utilization calculator.

How long does a closed credit card stay on your credit report?

Experian says up to 10 years from the closing date if it was in good standing, and seven years if it was closed with negative entries.

Experian says a closed account in good standing can stay on your report for up to 10 years from the date it closed, and one with negative entries stays seven years from the first late payment that led to the closure ^[2]. myFICO says the bureaus often remove closed, positive accounts after around 10 years ^[1].

While it's on your report, the account keeps counting. myFICO says FICO Scores generally consider the age of both open and closed accounts ^[1]. The hit to your history comes later, when the account drops off. Length of credit history is 15% of a FICO Score ^[2].

How do you close a credit card the right way?

Pay the balance to zero, use or move your rewards, call the issuer to close it, then confirm the closure in writing.

1. Pay off the balance Closing doesn't erase what you owe. You still have to pay the balance on schedule, and the issuer can keep charging interest on it ^[4].
2. Redeem your rewards myFICO says many issuers make you redeem points, miles or cash back before you close ^[1]. Experian says you'll likely lose what's left ^[3].
3. Move recurring charges Switch subscriptions and bills on the card to another card or account first ^[3].
4. Call the issuer The CFPB says you should generally be able to close an account by calling the card company ^[4].
5. Follow up in writing The CFPB suggests a written notice after the call, and your cardholder agreement may list other steps ^[4].

Closing a secured card works the same way, except the deposit pays off your balance and the rest comes back to you. See secured credit cards.

Can a credit card company close your account for not using it?

Yes. Federal rules let an issuer close an account with no new charges and no balance for three or more months in a row, and often without notice.

Regulation Z says an issuer can't close an account just because you don't pay finance charges, but it can close one that's been inactive for three or more consecutive months, meaning no purchases, cash advances or balance transfers and no balance ^[5]. Experian lists seldom using the card as one reason issuers close accounts, along with late payments, going over the limit and a big drop in your scores ^[2].

The CFPB says most issuers reserve the right to close an account at any time and the law lets them ^[6], and that they generally can do it without advance notice ^[7]. When an issuer closes your account, the CFPB says it generally must send an adverse action notice with the reasons, or tell you how to ask for them ^[8]. Experian suggests using a card about once every three months to keep it active ^[3].

What can you do instead of closing a credit card?

Ask the issuer to downgrade it to a no-fee card or waive the annual fee, or keep it open as a backup you use now and then.

myFICO suggests asking the issuer to waive an annual fee, downgrading the card, or keeping an older card open as a backup ^[1]. Experian suggests asking the issuer to downgrade the account to a no-fee version before you close it ^[3]. Experian describes this as downgrading the account itself, which is why it's sometimes called a product change. Whether one is offered, and to which card, is up to the issuer.

If the fee is the reason you're closing, see credit card annual fees.