If you’re no longer using a particular credit card, there are financial benefits to keeping it open — as long as it’s free. But if it’s costing you unnecessary fees (or tempting you to spend), make sure to close it correctly or you could hurt your credit score.
Before you cancel a credit card, ask yourself these questions:
- How long have you had the card? Your oldest credit accounts can be the most valuable to your credit score, because they show a long history of credit. It may not be a good idea to close your oldest credit card, especially if you have a positive payment history with it.
- What is the card costing you? If it has a high interest rate or an annual fee, and the card issuer refuses to eliminate the fee, it might be worth closing the card. There’s no need to keep paying money needlessly.
- Have you closed other cards recently? It’s better not to close several cards at once because it may look suspicious to potential creditors or lenders. Instead, if you want to close more than one card account, gradually pay them down and close the accounts, spacing the closures over time.
- Will you still have a few active credit accounts? Many experts recommend keeping four to six credit accounts open to keep your credit score healthy and show a strong debt to available credit ratio. These accounts don’t have to be all credit cards, however; student loans, car loans, mortgages, and other credit accounts count too.
If you decide to close a credit card account, take these steps to make sure you do it right.
1. Check your credit report. You can access a copy of your credit report online annually at AnnualCreditReport.com, without affecting your credit score. Take a look at the report to make sure there are no errors regarding the credit account you want to close.
2. Redeem outstanding rewards. You may be able to apply the rewards toward paying off the balance on the card. If not, cash in on a new video game or airline miles. Use whatever rewards you can before closing the card.
3. Pay off the balance. You won’t be able to completely close the account until the balance is paid in full. If you want the account to be closed to new charges while you’re still paying it off, you can usually contact the customer service department and ask for that.
4. Contact the card issuer. Once your balance is paid in full, call the card issuer and let them know you want to close the account. You can usually find contact information on the back of the card, your monthly statement, or on the issuer’s website.
5. Follow up. After 30 to 60 days, the card issuer and the credit reporting agencies should have had time to update your records. It’s a good idea to check your credit report to make sure the account has been updated without errors. The account and its associated payment history may remain on your report for several more years, but the status should show that the account is closed.