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A friend asked me last year whether she should close a store credit card she never used. My answer surprised her: probably not. Closing a credit card seems like a simple, responsible decision — you don’t use it, so why keep it? But in the world of credit scores, closing the wrong card at the wrong time can actually hurt your financial health more than keeping it open.
Knowing when to close a credit card — and when to leave it alone — is one of those quiet credit skills that can save you hundreds of dollars and protect your credit score. The decision isn’t always obvious, which is why so many people get it wrong. Here’s a clear framework for making the right call every time.
How Closing a Credit Card Affects Your Credit Score
Before deciding when to close a credit card, you need to understand what happens to your credit score when you do. Two major scoring factors are directly impacted:
Credit utilization ratio increases. Your credit utilization is the percentage of your total available credit that you’re currently using. If you have $10,000 in total credit across all cards and carry a $2,000 balance, your utilization is 20%. Close a card with a $5,000 limit and your total available credit drops to $5,000 — making that same $2,000 balance a 40% utilization rate. According to Experian, utilization accounts for roughly 30% of your FICO score, and experts recommend keeping it below 30%.
Average age of accounts may decrease. The length of your credit history matters. If you close your oldest card, your average account age drops, which can lower your score. The closed account stays on your credit report for up to 10 years, but once it falls off, you lose that history. MyFICO notes that length of credit history makes up about 15% of your score.
These two factors are why the default answer to “should I close this card?” is usually no — unless you have a specific reason that outweighs the credit score impact.
5 Times It Makes Sense to Close a Credit Card
There are legitimate situations where closing a card is the right financial move, even with the potential credit score dip. Here’s when to close a credit card without regret:
1. The Annual Fee Isn’t Worth the Benefits
If you’re paying $95, $250, or more per year and you’re not earning enough in rewards, perks, or cash back to justify the cost, closing makes financial sense. Before you cancel, call the issuer and ask to downgrade to a no-annual-fee version of the same card. This preserves your credit history and credit limit while eliminating the fee. If downgrading isn’t an option, closing is the smarter move than paying for a card that costs you money.
2. The Card Tempts You to Overspend
If having a specific credit card leads to spending you can’t control — especially on a store card with a high interest rate — closing it removes the temptation. Your financial health matters more than a few credit score points. Avoiding credit card mistakes that destroy your credit score starts with being honest about your spending triggers.
3. You’re Paying a High Interest Rate With No Way to Reduce It
If you carry a balance on a card with a high APR and the issuer won’t lower it, closing the card after paying it off prevents you from running the balance back up. This is especially relevant if you’ve transferred the balance to a lower-rate card and want to eliminate the old one entirely.
4. You’re Going Through a Divorce or Separation
Joint credit cards or cards where your ex-partner is an authorized user can create financial liability. Closing these accounts protects you from charges you didn’t authorize. In this situation, the credit score impact is secondary to financial protection.
5. The Card Has Been Compromised or Has Unresolvable Issues
If a card has been involved in fraud, has recurring unauthorized charges, or the issuer provides terrible customer service with no resolution, closing it and moving on is reasonable. Your peace of mind has value.
5 Times You Should Keep a Credit Card Open
More often than not, keeping the card open — even if you rarely use it — is the better strategy. Here’s when to keep it:
1. It’s Your Oldest Credit Card
Your oldest account anchors the length of your credit history. Closing it shortens your average account age, which can lower your score. Even if you never use it, keeping your oldest card open and making one small purchase every 6 months is enough to keep it active. Understanding how credit scores work helps you see why this single factor matters so much.
2. It Has No Annual Fee
If the card costs you nothing to keep open, there’s almost no reason to close it. A no-fee card sitting in a drawer still contributes to your total available credit and your credit history length — both of which help your score. Just use it occasionally so the issuer doesn’t close it for inactivity.
3. It Has a High Credit Limit
Closing a card with a high limit has an outsized impact on your credit utilization ratio. If the card represents a significant portion of your total available credit, closing it could spike your utilization and drop your score. Keep it open, especially if you carry balances on other cards.
4. You’re About to Apply for a Major Loan
If you’re planning to apply for a mortgage, auto loan, or any significant credit within the next 6-12 months, now is not the time to close cards. Any dip in your score — even a small one — can affect the interest rate you’re offered, which translates to thousands of dollars over the life of a loan. Keep everything stable until after your loan closes.
5. The Rewards or Benefits Still Have Value
Even if you don’t use a card for everyday spending, perks like purchase protection, extended warranties, rental car insurance, or airport lounge access might still be worth keeping. Calculate the value of the benefits against any annual fee before deciding.
The Downgrade Strategy: The Best of Both Worlds
If you’re unsure when to close a credit card because you want to stop paying an annual fee but don’t want to lose the account history or credit limit, ask your card issuer about downgrading to a no-fee card in the same family. For example, many premium travel cards can be downgraded to a basic cash back card with the same issuer.
Call the number on the back of your card and say: “I’d like to see if I can convert this card to a no-annual-fee option.” This is commonly called a product change, and most major issuers allow it.
The downgrade preserves your credit limit, keeps the account age intact, and eliminates the fee. It’s the closest thing to a perfect solution when you want to stop paying for a card but don’t want to hurt your score.
How to Close a Credit Card the Right Way
If you’ve decided when to close a credit card and you’re ready to cancel, follow these steps to minimize damage:
1. Pay off the remaining balance completely. You can’t close a card with an outstanding balance at most issuers, and even if you could, you’d still owe the money plus accumulating interest.
2. Redeem any remaining rewards. Cash back, points, or miles may be forfeited when you close the account. Log in and use or transfer them before canceling.
3. Call the issuer directly. While some issuers allow online cancellation, calling gives you the opportunity to negotiate. The retention department may offer a fee waiver, bonus points, or a downgrade option to keep you. If the offer isn’t good enough, proceed with closure.
4. Confirm in writing. After calling, follow up with a written request (email or secure message through your account) asking for confirmation that the account is closed with a $0 balance.
5. Check your credit report 30-60 days later. Verify the account shows as “closed by consumer” with a zero balance on your credit report. This matters for your records and ensures there are no errors.
6. Cut or shred the physical card. Don’t leave an active card number floating around after closing the account.
What to Do Instead of Closing a Card
If you’re thinking about closing a card but none of the “close it” scenarios apply, try these alternatives:
Sock-drawer it. Put the card away and make one small recurring charge on it (like a streaming subscription) with autopay turned on. This keeps the account active without requiring any thought.
Reduce the temptation. Remove the card from your digital wallets, online shopping accounts, and your physical wallet. Out of sight reduces impulsive spending.
Ask for a credit limit increase. If the card has a low limit that isn’t helping your utilization ratio much, request an increase. A higher limit on a card you barely use actively improves your utilization.
Negotiate a lower APR. If the interest rate is your concern, call and ask for a reduction before closing. The worst they can say is no, and if they say yes, you’ve solved the problem without losing the account.
Make the Right Decision for Your Financial Health
Deciding when to close a credit card comes down to weighing the costs against the benefits. If the card is costing you money (through fees, overspending, or stress) and you can’t fix the problem through downgrading or negotiation, close it. If the card costs you nothing and contributes to your credit profile, keep it.
The most important thing is making an informed decision rather than an impulsive one. Your credit score took time to build — read our guide on how to read your credit card statement to understand exactly what each card is costing you, and visit our complete credit card tips for beginners guide for a full overview of smart credit card management.
FAQ Section
Does closing a credit card hurt your credit score?
It can. Closing a card reduces your total available credit, which increases your credit utilization ratio — one of the biggest factors in your score. It can also shorten your average account age over time. The impact varies depending on how many other cards you have and whether you carry balances. If the card has no annual fee and no spending temptation, keeping it open is usually better for your score.
Should I close a credit card I never use?
Not necessarily. An unused card with no annual fee still helps your credit score by contributing to your total credit limit and your length of credit history. To prevent the issuer from closing it for inactivity, make one small purchase every few months and pay it off immediately.
Is it better to close a credit card or let the issuer close it?
It’s better to close it yourself. When you close an account, it shows as “closed by consumer” on your credit report. If the issuer closes it for inactivity or other reasons, it may appear as “closed by creditor,” which can look negative to future lenders — even though the credit score impact is similar.
How many credit cards should I have open?
There’s no perfect number, but most credit experts suggest 2-3 active cards as a healthy baseline. Having multiple cards helps your utilization ratio and diversifies your credit mix. The key is managing them responsibly — making on-time payments, keeping balances low, and only keeping cards that provide value.
Can I reopen a credit card after closing it?
It depends on the issuer. Some allow you to reopen a recently closed account (usually within 30 days). After that window, you’d need to apply for a new card, which means a new hard inquiry and potentially different terms. This is why downgrading is usually a better option than closing if you’re unsure.
When to close a credit card with an annual fee?
Close it when the annual fee exceeds the value you get from the card’s rewards and benefits. Before canceling, always call and ask to downgrade to a no-fee version first. If no downgrade is available and you can’t negotiate a fee waiver, closing the card saves you money even if there’s a minor credit score impact.
Toyin Onagoruwa is the founding editor of BrokeMeNot. With over five years of experience in personal finance writing and a background in financial services, he helps everyday people navigate credit cards, budgeting, and smart money management. Connect with him on LinkedIn.