How to cancel your credit card without hurting your credit score
Cancelling a credit card might seem simple, but it’s important to do it the right way to avoid harming your credit score. So, before closing your credit card account, consider these questions:
Do you use it regularly?Â
If not, cancelling could make sense. But, if it’s not bothering you to keep it, is it worth cancelling?
Does it have an annual fee?Â
If it’s expensive and not worth it, then cancelling the card can save you money.
Will it impact your credit score?Â
Cancelling a card can reduce your available credit and increase your credit utilisation, which may lower your score.
Steps to cancel a credit card
Step 1: Pay Off Any Remaining Balance
You can’t cancel a card if you still owe money. Either pay in full or transfer the balance to another card.
Step 2: Redeem Any Rewards
If your credit card offers cashback or points, use them before closing the account.
Step 3: Contact Your Card Provider
Call or send a secure message to your bank to request cancellation. Some lenders may ask for a written request.
Step 4: Request Written Confirmation
Ask for a written confirmation that your account is closed to avoid unexpected charges.
Step 5: Check Your Credit Report
After cancellation, review your credit report to ensure the card is marked as “closed.”
Why does cancelling a credit card affect your credit score?
Cancelling a card can lower your credit score for two reasons:
Reduced credit history - Older accounts help build a strong credit history. Closing an old card may shorten your history.
Higher credit utilisation - If you cancel a card and your total credit limit decreases, your credit utilisation percentage goes up, which may hurt your score.
Example
You have two credit cards:
Card A: ÂŁ5,000 limit
Card B: ÂŁ3,000 limit
You owe ÂŁ2,000 in total.
Your credit utilisation is 25% (ÂŁ2,000/ÂŁ8,000).
If you cancel Card B, your total available credit drops to ÂŁ5,000. Your utilisation rises to 40% (ÂŁ2,000/ÂŁ5,000), which may lower your score.
Cancelling a credit card should be done thoughtfully to avoid harming your credit score. If you’re unsure, consider keeping the card open but inactive to maintain your credit history and keep your credit utilisation low.
This blog is for informational purposes only and does not constitute financial advice. Please speak to a qualified financial adviser before making financial decisions.