What Happens When You Close a Credit Card Account?

Closing a credit card can negatively impact your credit score by increasing your credit utilization ratio and decreasing your average age of accounts. These are two of the most important factors of your credit score. The impact on your score depends on factors like how much debt you have, how many other credit cards you have and how long you’ve been building a credit history.

Here’s a rundown of what happens to your credit score when you close a credit card:

1. Your credit utilization ratio increases: Credit utilization is the total amount of debt you’re carrying divided by the amount of credit that’s available to you across your individual credit card accounts, as well as your credit card accounts overall. Credit utilization makes up 30% of your credit score. Closing a credit card decreases your available credit, so your utilization rate would rise if you’re carrying balances on any other cards. Credit scoring experts recommend having a credit utilization ratio of less than 30% to achieve a high credit score.

   Let’s take an example where you spend $600 a month across two credit cards:

   Card A: $400 balance and $800 credit limit = 50% utilization
   Card B: $200 balance and $1,000 credit limit = 20% utilization

   Your total utilization in this scenario would be 33%:

   Total balances ($400 + $200) ÷ Total credit limit ($800 + $1,000) = 33% credit utilization

   If you closed Card A and still spent $600 a month on Card B, your utilization would increase to 60%:

   $600 balance ÷ $1,000 available credit = 60%

   Learn more about credit utilization ratio.
2. Your average length of credit history decreases: The average amount of time you’ve had credit makes up 15% of your credit score. When you close an old credit card, your average length of credit history will decrease. Those who are newer to using credit will suffer more than those who’ve been borrowing and repaying for decades.

   For example, if you have a card that was opened 10 years ago and another that was opened five years ago, your average length of credit is 7.5 years.

   Card A (10 years) + Card B (5 years) ÷ 2 = 7.5 years

   Closing your oldest card would decrease your average length of credit history to five years.

   The good news is that closed accounts in good standing stay on your credit reports for 10 years, so the length of your credit history won’t be negatively affected for a decade unless you decide to open a new credit card account (which will then reduce your average age of accounts).
3. You could reduce your credit mix: The variety of credit accounts that you have makes up 10% of your overall credit score. Having a diverse range of credit can boost your credit score, because it shows lenders that you can handle several types of loans responsibly. If you only have one credit card, it may be important to keep it open to maintain your credit mix.
   For example, let’s say you have a car loan and a credit card. If you close your credit card account, you’re only left with a car loan, which is a type of installment loan. Your credit mix would become less diverse, which could negatively impact your credit.
   Learn more about how closing a credit card can hurt your credit score.

Depending on the card you have, your rewards may be immediately forfeited or may be credited to your account as a statement credit. You should refer to your cardmember agreement, since the terms vary by issuer.

If you have a co-branded card with an airline or hotel chain, the points you’ve earned typically will be stored with that brand’s loyalty program rather than managed by your card issuer.

If you close your card, the rewards you’ve earned should still be available through the airline or hotel program and subject to their rewards terms. The only exception may be points and miles that haven’t been transferred to the airline or hotel program yet.

It’s possible to close a credit card account when you still owe a balance, but there are several important details to keep in mind before you do:

1. You’ll continue receiving statements until your balance is paid off that include your balance, accrued interest and minimum payment.
   Learn about how to read your credit card statement.
2. Interest will continue to accrue. The credit card issuer will continue to charge you interest until you’ve paid off your balance in full.
   Learn about how to avoid interest on a credit card.
3. You won’t be charged new fees. You won’t be charged a fee to close your account and your monthly and annual fees won’t increase while you pay off your remaining balance. However, if you have annual or monthly fees, you may still be required to pay them until your balance is paid off.
   Learn about credit card fees.

Assuming you keep your payments up-to-date and pay off your closed card over time, the account will still appear favorably on your credit reports and help you build credit over time. But, a closed credit card account can negatively impact you if you fail to make monthly payments or pay your bill after its due date.

A secured credit card requires an upfront cash deposit as collateral, in exchange for better approval odds for applicants with low credit scores. With that in mind, you may be wondering if you get your security deposit back when you close a secured credit card.

Fortunately, as long as your account is in good standing and paid off, you’ll get your security deposit back.

Some secured cards might also automatically upgrade you to an unsecured card and refund your deposit if you use your secured responsibly and make enough on-time payments. In that case, you can keep the account open or close it — it’s your choice.

While keeping a credit card account open is usually the best choice to maintain a good credit score, there are some scenarios where it might make sense to close an account:

When to close a credit card:

• Avoiding fees: Closing an account can get you off the hook for paying annual fees when downgrading to a no-annual-fee credit card isn’t an option. Consumers often close credit card accounts with high fees when they aren’t getting enough value out of a card’s perks or rewards enough to warrant an annual fee.

• Avoiding temptation: If you have a hard time keeping a credit card without overspending on it, it may be a good idea to close the account.
• Limiting your risk: Maybe you broke up with an ex who frequently used your card number to make online purchases. Or, perhaps you know that several of your family members have your credit card details. Or, you may worry about your details being stolen by a random thief and used to make fraudulent purchases. In any case, closing an account means any new purchases will be denied
• Getting a fresh start: Maybe you have credit cards from old relationships or periods of your life you want to move on from. In that case, closing old cards and applying for new ones could make it easier to start over.

Find your perfect card in 30 seconds. Check your approval odds so you can shop smarter.

1. Keep your card open, but use it sparingly: Maybe you’ve stopped using your credit card because your spending habits have changed or you’ve opened a better card. If your credit history is sparse, consider keeping your old card open and using it for a regular monthly bill to keep it active. This will help you avoid your issuer closing it for inactivity.
2. Switch your card: In many cases, you can have your issuer switch your credit card to a different card while keeping your credit history intact. This could allow you to swap a high annual fee card for a lower annual fee card, or simply find a card that better fits your spending habits.
3. Ask your issuer for a lower annual fee or interest rate: If you have a high annual fee card or a card with a high interest rate that you want to cancel, consider calling your card issuer first. You can ask for your annual fee to be waived or ask for a lower interest rate. Many issuers are willing to work with you, especially if you have a good relationship.