Does Closing a Credit Card Hurt Your Credit?

September 14, 2022 By: bellfinance

We’ve all been there before: you’re on a mission to raise your credit score. You’ve been cleaning up your credit when you pull out your wallet and start noticing that you have a few more credit cards than you previously realized. You’re now wondering if having so many credit cards negatively impacts your credit.

Maybe you opened a store-specific card to your favorite place to shop, or perhaps you have an old card from college or your younger years when you first applied for one and just forgot about it. Either way, you’ve found yourself thinking it might be time to close those cards, but you’re also wondering, “What happens when I close a credit card?”

While it seems counterintuitive, in some cases, closing a credit card can hurt your credit, which is why you should consider many factors before you start calling your credit card companies. By reading this blog, you’ll learn about the pros and cons of closing a credit card, when to cancel a credit card, as well as a few tricks on how to close a credit card without hurting your credit. Keep reading to find out more.

What Happens When I Close a Credit Card?

Unfortunately, closing a credit card isn’t just as simple as letting the company know that you no longer need the card. When you close a credit card, you no longer have access to the credit it offers, but you are still responsible for paying off your balance. When you close your account, the credit card company reports the closure to credit bureaus. That card’s impact on your credit, both positive and negative, can continue impacting your credit history for up to 10 years.

What Are the Pros and Cons of Closing a Credit Card?

There are several pros and cons to closing a credit card account.

Pros:

• You remove the temptation to spend more money
• You will have fewer cards to keep track of 
• Your credit score won’t be impacted if you close a credit card with a zero balance 

Cons:

• Open cards help maintain your credit utilization ratio
• Open cards improve the average age of your credit
• Open cards and long-standing accounts preserve low-interest rates and perks
• Closing a card with a balance can negatively impact your credit score
• Open cards with good history give you better chances of getting approved for a personal loan

When Is It a Good Idea to Cancel a Credit Card?

The times that closing an account is always a good idea are when:

• There are high annual fees, especially on an account you don’t use. Before closing, it’s a good idea to call the card issuer to see if they’ll waive your annual fee.
• You’re going through a divorce or separation. If you have joint accounts, you’ll be liable for all past and future charges on the card.
• If the very existence of the card is causing you to be irresponsible with your spending, it’s best to nip temptation in the bud and close the card.
  

How to Close a Credit Card Without Hurting Your Credit

If you’re ready to say goodbye to your credit card, there are a few things that you should do to close the account so your score won’t be negatively affected. 

1. Check outstanding rewards balances and redeem them, so you don’t lose them.

2. Call your card issuer and find out the payoff balance. 

3. Wait 60-90 days after closing your credit card to check your credit score to confirm that your report shows that the account is closed.

4. Destroy the card.

Knowing when to close a credit card account can be tricky, but with these tips and tricks, you’ll be able to make a better-informed decision before closing your cards. To learn more, contact us at Bell Finance today!