That old credit card sitting in your wallet might seem harmless, but sometimes, it’s time to part ways. Whether you’re simplifying your finances, avoiding an annual fee, or removing the temptation to spend, closing an account can feel like a positive step. Before you make that call, however, a little preparation can ensure the process is smooth and doesn’t negatively impact your financial health.
Before You Call: A Quick Checklist
First, redeem any remaining rewards points or cash back. Once the account is closed, those benefits often disappear. Next, pay off your entire balance. You cannot close a card with an outstanding balance. It’s also a good idea to update any automatic payments linked to the card, like streaming services or gym memberships, with a new payment method to avoid missed bills.
The Simple Steps to Close Your Account
To officially close the account, you need to contact your credit card issuer directly. Calling the customer service number on the back of your card is the most reliable method. Clearly state your intention to close the account. The representative will likely try to retain you as a customer, so be prepared to politely but firmly confirm your decision. After the call, follow up in writing if possible, and always check your next statement to confirm a zero balance and that the account is listed as closed.
How Closing a Card Affects Your Credit Score
This is the most important consideration. Closing a credit card can temporarily lower your score. This happens for two main reasons. First, it reduces your total available credit, which can increase your overall credit utilization ratio—a key factor in your score. Second, if it was one of your older accounts, it can shorten the average length of your credit history. If the card has no annual fee, you might consider simply keeping it open but not using it to protect your credit history.
When Keeping the Card Open Makes Sense
Think twice before closing your oldest credit card, as a long credit history is beneficial. If it’s your only card, closing it could significantly reduce your available credit. Also, if you’re planning a major loan application soon, like for a mortgage or car, it’s usually best to avoid any changes to your credit report, including closing accounts, in the months leading up to it.
Closing a credit card is a straightforward process, but it pays to be strategic. By checking your rewards, paying off the balance, and understanding the potential impact on your credit score, you can make a confident decision that supports your broader financial goals.
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