How to cancel a credit card (without killing your credit score)

How to cancel a credit card (without killing your credit score)

I have a credit card I'd like to cancel, but I don't know if I should. I'm afraid it'll hurt my credit score. Today I'm going to walk you through in real time as I evaluate this decision. Then I'm going to explain how to cancel a credit card, no matter why you want to do so.

I normally don't pay much attention to my credit score. I know that it ranges between 800 and 820, so I don't worry about it. With a score like that, I'm considered to have “exceptional credit”, and that's good enough for me. (Kim's very proud that she has a higher credit score than I do, by the way.)

That said, for the past several years I've been carrying a credit card that I don't want or need. It's a Chase British Airways card that I signed up for in 2011. It's a fine card, but I never use it because I have better ones. My primary credit card right now is the Chase Sapphire Reserve, which I use for 99% of my personal credit transactions.

Basically, I'm paying $75 per year — the British Airways card's annual fee — for nothing…except to maintain my credit score. I don't like it. I'd rather cancel the card and take a temporary hit to my credit. But is it bad to cancel a credit card? And if it's bad, how bad is it?

I've decided to document the process! Let's find out together.

My Current Credit Score

To start, of course, I need to learn my current credit score.

First, I visited Credit Sesame, a free credit-monitoring tool that I use maybe once or twice a year. When I last checked in January 2018, Credit Sesame said my credit score was 814:

My 2018 credit score according to Credit Sesame

Today, Credit Sesame says my credit score is 816:

My current credit score according to Credit Sesame

My credit score has remained roughly the same over the past twelve months. (As a side note, I think it's hilarious that Credit Sesame thinks I should open lots of new credit cards to boost my credit score. Can you guess what the company's revenue model is?)

Next, I went looking for a second opinion. Because I'm a Chase customer, I have access to their “Credit Journey” feature, which provides free VantageScore monitoring. (VantageScore is a competitor to the popular FICO score. Both scores are numerical representations of your credit history designed to give lenders a quick way to evaluate whether or not to do business with you.)

Here's my current VantageScore according to Credit Journey at Chase:

My current credit score according to Chase

Yay! It's the same as reported by Credit Sesame. As of today, let's call my credit score 816.

Credit Journey also gives you a one-year history of your credit score so that you can spot trends. Here's how my score has fluctuated over the past twelve months. (I'm not sure what's responsible for the recent downward slide. I haven't been doing anything with credit…)

My credit score history

For added insight, Credit Journey provides a credit overview so that you can see the status of various factors that go into making up your credit score.

An overview of my credit score

This is useful, I suppose, but Credit Sesame's diagnostic tools are a little more robust. Credit Journey doesn't explain that my lack of credit diversity is the largest factor preventing me from having a higher score. Credit Sesame makes this very clear. (That's the red D in the screencap I shared earlier.)

Note: If you don't have a Chase credit card and don't want to use Credit Sesame, you can also get your free credit score from NerdWallet. The only catch? You have to create a NerdWallet account.

What Happens If I Cancel a Credit Card?

Perhaps most relevant for my current situation, however, Credit Journey allows you to simulate your credit score given a variety of changes.

  • What happens if you take on a new loan?
  • What happens if you cancel a card?
  • What happens if you add a new credit card?
  • What happens if one of your accounts goes to collections?

With the Score Simulator, you can see how certain changes will affect your credit score.

Unfortunately, this Score Simulator is a general-purpose tool. It doesn't let users exercise precise control over their input. So, for instance, I'm unable to model canceling my Chase British Airways card specifically.

However, I'm able to model what happens if I cancel my oldest credit card. Because I cancelled all of my cards when I was digging out of debt in the early 2000s, my oldest card is a Capital One credit card that I acquired in 2007. That's not too far off from the British Airways card that I took out in 2011.

To test what might happen if I cancel my Chase BA card, I toggled the “cancel your oldest card” switch:

Credit score toggle switch

Voila! I was instantly able to see that — according to this tool — canceling my BA card will, at most, ding my credit score by twenty points. The actual impact would probably be a little less.

Credit score change

My current credit score is great. According to one score simulator, cancelling a card will have a minimal effect on my score. So, why am I still nervous? I'm not sure. To assuage my fears, I contacted credit expert Liz Weston, author of Your Credit Score. “Does cancelling a credit card hurt your credit score?” I asked, and I explained my situation.

She wrote back with a nice, meaty answer:

It's actually hard to predict how big the impact will be and how long it will linger, but really you don't need to worry about it for number of reasons. Those include:

  • When scores are as high as yours, even a larger drop in points wouldn't affect you on a practical level. Once your scores are in the 760 range, you typically get the best rates and terms offered by lenders.
  • Credit score simulators are just that – simulators. They can estimate what might happen to your score(s), but the reality can vary. The outcome of an action depends on various information in your credit report.
  • Scores take into account the average age of your “trade lines,” or credit accounts, as well as the age of your oldest account. That's why you often see cautions against closing the oldest account. However, age of accounts is a fairly small part of your score, and the damage doesn't happen immediately, since the closed account will continue to be reported and its age factored into your scores. A bigger deal when closing accounts is your credit utilization. Shutting an account removes the available credit limit from the calculations, and that may have a bigger effect on your score.
  • The credit score you're looking at can (and probably will) differ from the credit score(s) a lender may use, which means the impact could differ as well. The formulas for VantageScore and FICO in general aren't the same. Plus, they each have been updated (in FICO's case, multiple times) and lenders may use older versions or ones that have been tweaked for their industries, such as the FICO Auto Score 8 for auto loans.

That's a fairly long answer to your quick question! In general, it's a good idea to avoid closing accounts when you're trying to build your scores or if you're in the market for a major loan. Once your scores are high, however, closing the occasional account shouldn't cause you undue worry.

Weston brought up a point I hadn't considered: Canceling a credit card affects not only my age of accounts, but also my credit utilization. I have a $20,000 credit limit on that Chase BA card, so cancelling it will mean that I'm using a larger percentage of my available credit.

That said, I don't actually carry any sort of credit balance. I pay my bills in full each month. As a result, my utilization should remain relatively low. Plus, if I do decide my score gets dinged too much, I'll take the Credit Sesame approach to building credit: I'll take out a new card, one without a fee.

How to Cancel a Credit Card

If I do choose to cancel my British Airways card, what's the process? Closing a credit card account is easy, but if you decide to do it, you should do it correctly.

If you plan to close several accounts, do one at a time. When choosing which accounts to cancel, first eliminate cards that charge you fees. Cancel new cards before old cards. (Remember: the age of the account affects your credit score.) Consider keeping cards that offer good rewards programs.

Before you cancel a credit card account, pay off the balance or transfer it elsewhere. Never attempt to cancel an account on which you still owe money. I've heard horror stories of banks raising interest rates on people who do this.

When you're ready, follow these simple steps:

  1. Contact your credit card company. You might be able to cancel your account online, but most companies make this difficult (or impossible). You'll probably have to call. This so the sales rep can persuade you to keep the account open, of course. When this happens, remain firm. Take notes!
  2. Send written confirmation. After the call, use your notes to draft a follow-up letter like this one. Mail it to the card issuer.
  3. Check your credit report. After you receive confirmation that the card has been canceled, it may take several weeks for the change to be reflected in your credit report. It is your responsibility to verify that your report is accurate, so keep tabs on it. Like me, you may also want to monitor your credit score to see if there's any damage.
  4. Once you're certain the account is closed, cut up your credit card! Hurrah!

Should you cancel your credit cards? Only you can make that call. Do what makes sense for you and your situation. If you think it's more important to maintain your credit score, and if you're sure you won't abuse them, then keep the accounts open. But I think it's a mistake to keep your credit cards if they cause you woe. (Plus, each open account is another possible source of identity theft!)

If you have trouble with compulsive spending, it's best to cancel your accounts. Don't just cut them up, but cancel them. When I was having trouble with credit, I canceled my accounts, which bought me time to learn to manage money responsibly without an ever-present temptation to spend.

In the end, this all seems worth it to me. If I cancel my British Airways card, my credit score drops from 816 to 796 but I save $75 per year. Because I have no plans to make any moves that rely on my credit score in the near future, this sounds like a smart move. I'm going to do it!

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Angelica
Angelica
1 year ago

This is such a timely article for me! It’s past time and my husband take a look at all our open accounts and make some moves. So many old “store” accounts that we signed up for to take advantage of a one-time 40% deal that I just don’t want open. We expect to finance a car in another year and three quarters (yes, I’m counting down) so I’m glad it shouldn’t impact things too much.

WantNot
WantNot
1 year ago

Useful post, J.D. Closing a credit card account is a good idea, and you’ve given a great tutorial on its impact on the credit score. The use of credit cards today seems to be out of whack–it certainly costs a lot of people a lot of money! When I was 22, I learned about “how to use credit cards and build my credit” from an uncle who was a Wall Street Investment Manager. I will always be grateful to him for this life-lesson. At the time, my sole credit card was a Mobile Gas Card. He recommended I open an… Read more »

Jennifer
Jennifer
1 year ago
Reply to  J.D. Roth

I would have been happy to use a credit card on the last two cars I bought (used), but they limited me each time to ~$1,500 on the card. I don’t think they ever really gave me a reason, and I didn’t push it much, but it would have been nice to get those rewards….

S.G.
S.G.
1 year ago
Reply to  Jennifer

They are charged for the CC transaction.

FoxTesla
FoxTesla
1 year ago

J.D. – By your own admission, since you are not using your credit for anything, close the BA account to save the $75. But, at the same time, I would absolutely also sign up for the Chase Freedom Unlimited to pair with your CSR. It’s no annual fee, earns a flat 1.5x rewards and can pool points with the CSR. I can’t remember what your monthly spending from the past couple of posts was, but I do remember that it wasn’t all travel and dining, so transferring that spending from the CSR to the CFU immediately earns more rewards points…and… Read more »

FoxTesla
FoxTesla
1 year ago
Reply to  J.D. Roth

One more “free money” follow-up: the current sign-up bonus for the CFU is $150 cash back if you spend $500 in the first three months, but this would only be true for a new opening for the CFU. If the Chase reps ask “do you just want to change the card from BA to CFU and not do a hard credit pull”, the sign-up bonus would not apply.

Joe
Joe
1 year ago

First, you should call the company and ask to change to a different card with no annual fee. Most cards have a no annual fee version. Then you won’t need to cancel it and it won’t change your credit score.
Of course, canceling it is a good option too. You won’t have to worry about it anymore.

S.G.
S.G.
1 year ago
Reply to  Joe

This was my thinking as well. It’s amazing how many cards can exist in the same card family. I only cancel if I actually dont like the company (usually their customer service).

Adrian
Adrian
1 year ago
Reply to  J.D. Roth

I agree with this suggestion. Another option is to move the available credit on your BA card to your Chase Sapphire Reserve and then cancel BA. This will keep your overall credit number.

PJH
PJH
1 year ago

Given that every company calculate credit scores differently, and the likes of ‘Credit Sesame’ are in the business of selling credit scores (or using credit scores to sell other things) – are you not placing undue importance on the numbers they give you rather than, say, the companies who are actually going to provide you credit and will calculate their own score for you, given that they’re likely to score differently for different things? A few years back the UK firms selling credit scores (Equifax and Experian were the main culprits) were regularly lambasted on one money forum I frequent… Read more »

HomeschoolMom
HomeschoolMom
1 year ago

J.D., rather than open a new credit card to lower your credit utilization ratio, you can call the companies whose cards you still carry and ask to have your credit limits increased. This will bump up your available credit, resulting in a lower credit utilization ratio. It will also avoid a temporary dip in your score for opening a new account and the hassle of managing new accounts.

FoxTesla
FoxTesla
1 year ago
Reply to  HomeschoolMom

Doing so will usually require a hard pull…which all things equal, one additional hard pull will not be as negative a hit as the change in accounts age/number of accounts, but there is still a hit.

S
S
1 year ago

I have a great credit score and pay all my balances off in full each month. However, if I spend more one month, say for a vacation, my score is dinged for a month or two. Why does this happen? Why should it matter how much I spend in one month? Thanks.

Adam
Adam
1 year ago

I’ve been a huge fan of this blog for many years and this is the first time I’ve come across an article where I feel like I can contribute some helpful comments. Maximizing credit card rewards and credit score impact is kinda my “thing”. First, I’d like to inform you that both Credit Sesame and Chase Credit Journey do not report your FICO score — they show you a VantageScore, which is not the same score. FICO is the gold standard credit score used when about 90% of credit decisions are made. I’d be happy to help explain the tangled… Read more »

Patrick
Patrick
1 year ago

Between my wife and I, we have added and canceled over 100 credit cards over the last 10-15 years. In our case, getting rid of a card has had little to no effect on our scores which have ranged from 790 to 820 over the years. We’re down to 2 credit cards each now, but will probably start back playing the credit card game in a year or so. I’d say we’ve averaged $5k-$10K in hotel/air saving per year doing this, but it’s getting harder.

Tonya
Tonya
1 year ago

I’m surprised you’ve been throwing away $75 a year just because you were worried about your credit score. Even if you are planning to finance something soon, it’s unlikely the increase in interest rate (because of the decrease in credit score) would come anywhere near $75 a year.

I had too many open credit cards and finally decided to just canceled a couple cards and significantly decreased the limits on a handful of other ones. My credit score dipped for a few months then went back up; not a big deal.

Jason
Jason
1 year ago

Also, since they are both Chase cards you can just visit a branch as well if you don’t want to call. Usually if what I’m trying to do is really complex to describe over the phone then I’ll just go in and explain it to the banking representative there. Once they see that you are keeping your business with Chase (via the Sapphire Reserve) they don’t mind making the calls for you to set up your accounts how you like (in your case transferring the $20,000 in credit to the Reserve and closing the BA card in one swoop to… Read more »

mle detroit
mle detroit
1 year ago

I don’t pay the bank. The bank pays me.

IOW, no-fee rewards cards only, 30-day float, our “bank” is a credit union. With one exception: DH’s AmEx that earns Delta Skymiles and gets each of us a free bag check (Detroit is a Delta hub).

bosw74
bosw74
1 year ago

Hi JD,

Something to consider when you have multiple cards from the same provider…ie in this case Chase. I recently cancelled a credit card with Chase – you mention that you also carry the CSR, another Chase card. In a similar scenario I also had another chase card at the time. The service rep on the phone kindly (and smartly) offered to transfer the credit limit over to the other remaining Chase card, so there would be no impact on my credit score given the credit utilization ratio would not change that way.

Wally1
Wally1
1 year ago

I have been reading the comments and one thing keeps me shaking my head. The thought process that constantly buying things on credit every month is earning points for some reward. Your fico score is so important in life, Really? The best credit score would be zero, this means you always pay in cash and you actually own everything you buy. Most of you think this is impossible, not so, it’s called discipline. So yea, it’s OK to have a credit card to make reservations, online purchases etc. This is OK if you can discipline yourself, but the credit card… Read more »

S.G.
S.G.
1 year ago
Reply to  Wally1

Most people here pay off their balances every month. But I object to your use of the word “slave”. Slavery is a horrible thing. And I think the tendency to talk about “wage slavery” or “debt slavery” is only true if you acknowledge that if you are the slave, you are also the master. Debt and employment are byproducts of a person’s choices. I dont mind the psychological perspective of an individual as both slave and master. But that isnt how it’s used. We are NOT slaves of our employers and/or of our banking institutions. I think it is wrongheaded… Read more »

Wally1
Wally1
1 year ago
Reply to  J.D. Roth

Mr. Roth, as much as I value your insights on this subject, I disagree. Financial statistics reveal most American families are deeply in debt and living paycheck to paycheck, however they have newer homes, newer cars and accept being deeply in debt. So, they are financial slaves. If either parents ever lost their job they would quickly lose everything. This mind set is not acceptable. I blame our liberal school systems that does not teach any money management skills. I also blame parents, kids emulate their parents who seem to have a “live for today” attitude rather than actually planning… Read more »

S.G.
S.G.
1 year ago
Reply to  Wally1

I think you should read JD’s response again.

Bonnie
Bonnie
1 year ago
Reply to  S.G.

Can’t argue with someone who drank the Dave Ramsey Kool-Aid and can’t entertain another point of view.

FoxTesla
FoxTesla
1 year ago
Reply to  Wally1

While notionally, yes, not having any temptation or history of credit sounds great, but as many an article will tell you, credit score is used for more than interest rates – they are touching rent/lease applications, job applications, insurance rates, i.e. things being cash only doesn’t let you avoid.

El Nerdo
El Nerdo
1 year ago
Reply to  FoxTesla

Ah, job applications–no. Employers hiring people for positions that involve security clearances etc do not use your credit SCORE.

They might look at your credit HISTORY to see if you’re prone to making bad decisions or defaulting on your promises, i.e., if you’re trustworthy or not.

But if you own all your assets outright, don’t owe anybody, and have no history of defaulting, then you’re not a theft or fraud risk.

See:
https://www.nerdwallet.com/blog/finance/credit-score-employer-checking/

ken
ken
1 year ago

Hey JD,

It is better to just call the credit card company and see if you can lower the credit card to no annual fee one. It is pretty easy to do and they will want to keep you a customer. You may lose some perks with the card but will save you from cancelling. Then just put the card away somewhere or cut it up and don’t worry about.

Jenni
Jenni
1 year ago

As someone who lives in Finland, I don’t get this whole credit score system. What’s the purpose of it, and what is your score used for? Is it when they evaluate if you should be eligible for another credit card by a different company, for consumer loans or for long-term loans like for your house? We don’t have that system, eg. my Amex is based on how much I roughly earn per year. If you default on the payments they cancel your card and place the amount owed into collection. If it goes into judicial collection you won’t be eligible… Read more »

Kate
Kate
1 year ago
Reply to  Jenni

In the U.S., your credit score and history is used to see if you quality for a loan (like for a car or house) or credit card or such, what rate you will pay, and sometimes even if you will be approved to rent an apartment (they want someone who has a history of paying on time), or offered a job (they want someone who is responsible). Creditors do typically also take your income into account, but less so for credit card companies (mine keeps raising my limits and combined they are now nearly at my yearly income).

Jenni
Jenni
1 year ago
Reply to  Kate

Thank you so much for taking the time to explain, Kate! So basically you _have_ to use a credit card to be able to rent or buy a house? I realize it’s not this simple, but to me that seems like a system that’s built on pushing people to (over)use credit. Over here you typically have to save 10-15% of the price of the house you want to buy, and have a steady income to qualify for a loan. The other route is to have a guarantor (+stedy income) for at least that amount. Typically for first home-buyers that would… Read more »

Sarah
Sarah
1 year ago

Thank you for the great article. I’m in the process of trying to build up my credit and reduce my credit card debt, this was insightful and I wont be rushing to close off the cards once they’re paid up.

Do you know of any credit simulators for Canadians? My google search only turned up American options and they don’t work for those of us north of the boarder.

Thanks!

Hal Norris
Hal Norris
8 months ago

If you have several chase accounts, you can move your available credit to another card with a simple phone call. This reduces the “loss” of your credit line.

Tracey
Tracey
4 months ago

Great article! Now tell me this audience…is there a difference in canceling a credit card versus a store credit card? What’s the credit score hit like?

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