When It’s Actually OK to Cancel a Credit Card
You might’ve heard that closing a credit card is always bad for your credit score — and while it can affect your score, that doesn’t mean you should never do it. In fact, in certain situations, canceling a card is a reasonable and even smart decision.
The key is to weigh the pros and cons carefully and make sure you’re doing it the right way.
✅ Good Reasons to Close a Credit Card
1. The card charges an annual fee — and you’re not using it
Why pay for something you rarely use? If a rewards card’s benefits no longer justify the annual fee, it may not be worth keeping.
💡 Try this first: Ask your issuer if you can downgrade to a no-annual-fee version of the card. That way, you preserve your credit line without paying for a card you don’t use.
2. You’ve had the card for a short time
Length of credit history matters to your score, but newer accounts contribute less. If you’re unhappy with a recently opened card, closing it won’t cause much damage.
3. It has a low credit limit
Credit utilization is a big part of your score. If the card has a small limit, shutting it down probably won’t move the needle — as long as your total balances stay below 30% of your overall available credit.
4. It’s fueling overspending
If a card makes it easy to rack up debt you can’t afford, it may be better to remove the temptation. The short-term score dip could be worth it to avoid long-term financial trouble.
⚠️ How to Cancel a Card the Right Way
If you’ve decided canceling is the best move, take a few steps to limit the impact:
✅ Use any remaining rewards
Some issuers wipe out unused points or cash back once the account is closed. Redeem anything you’ve earned before pulling the plug.
✅ Pay off the balance first
You typically can’t cancel a card with a balance — and even if you can, you’ll still owe the money. Clear the account first to simplify things.
✅ Call your issuer (or check online)
Contact customer service to start the cancellation process. Some issuers let you do this online; others may require a call or written request.
✅ Follow up and monitor your credit
After a couple of months, check your credit report to confirm that the account is officially closed and the information is correct.
✅ Don’t cancel multiple cards at once
Give your credit score a chance to stabilize between closures. If you’re planning to close more than one account, space them out over several months.
Final Thought
While canceling a credit card can slightly ding your score, the effect is usually small and temporary — especially if you continue managing your remaining credit responsibly. If a card no longer fits your needs or is hurting more than helping, closing it might just be the right move.