Are you worried about your credit score, afraid to cancel a credit card in case it causes your score to drop? There’s no need to let a credit card company hold you hostage, especially if you have good or excellent credit.
You CAN cancel a credit card without the world coming to an end, so you don’t have to keep a credit card around that has annual fees or other negatives.
But I get it. You want to understand…
What closing a card will do to your credit score
First, know that you don’t just have one credit score. There are a whole bunch of them — including the FICO scores and the VantageScore — and they’re all only snapshots in time. More importantly, anything you do that’s related to debt or potential debt can have an impact. So if you’re afraid of closing a credit card, you should also be afraid of opening one, using it, carrying a balance, missing a payment, paying late, and a host of other things.
No one can tell you ahead of time exactly how doing any of those things will impact your credit score. But I can tell you that, in general, closing a card just dings your score a little if you’ve got good or excellent credit. And that ding is usually temporary, so not usually anything to worry about.
Some exceptions would be if it’s your ONLY type of debt, your oldest card, if it changes your credit utilization ratio, or if you were right on the border between a good and not-so-good score. Even then, the impact is usually temporary.
Why cancel a credit card?
There are plenty of good reasons to cancel a credit card, such as if…
- You’ve learned that credit cards not for you (by carrying a balance, incurring late fees, or experiencing other issues with them)
- You’re sick and tired of paying annual fees and dealing with customer service issues
- You’re worried about possible identity theft issues
- You’re getting divorced, and the card is held jointly
- You haven’t used the card in a long time
- You’re DONE with debt for good
The right time to close a credit card
Once you’ve decided to close a credit card, the right time to do so is usually whenever you feel like it — unless you’re planning to take out a mortgage in the next few months that doesn’t use manual underwriting. (In that case, you basically shouldn’t do anything that might negatively impact your credit scores.)
When you close the account, it’s best to notify the credit card company’s customer service department that you’d like the card canceled at your request — and then follow up afterward to make sure it really did get closed.
Think about this
If you still feel like you have to keep paying an annual fee to preserve your credit score, think about this:
Is your overall goal to have a good credit score, or is to handle your money well and get out of debt?
If your goal is to do smart things with your money, concentrate on doing those things instead of spending your time worrying about credit.