Old Credit Cards Should you cancel them?

To ditch old credit cards, or not ditch old credit cards? That is the question... The answer depends on which cards you have and what you might need credit for in the future. This is a Q&A guide on what to do with your dusty plastic.

This is particularly useful for people who want to access the market's top deals for new customers but already have the cards that are dangling those offers.

In This Guide

• Why bother cancelling?
• When I do regenerate as new customer?
• Should I keep any cards?
• How do I cancel properly?
• The best cards to keep?

Why not just keep them all?

Cancelling unused cards has two big benefits - especially if you think you'll need to apply and be accepted for the market's best credit card deals in future.

This also applies to a lesser extent if you're going to apply for a new mortgage or lump sum loan somewhere down the line.

• Improved credit score.

  Jettisoning old cards instantly means you have access to less 'available credit'. This acts as a boost to your credit score; it tells lenders there is less risk of you running up big balances on multiple cards and becoming over-indebted.

  If you definitely don't need the card, this is a good reason to consider cancelling. For more credit score boosting tips, read the full Credit Rating guide.

• Regaining access to new customer offers.

  

  Lenders are obsessed with tempting new customers, which means the very best deals are only available to new cardholders (see Balance Transfers and 0% Cards guides.
  
  Instead of inwardly fuming, by cancelling existing credit cards you can regenerate yourself, Doctor Who-style, as a 'new customer'.
  

  This is because once you've left, after a while the lender will want to tempt you back. The length of time you have to wait in order to qualify for the hot intro deals is up to individual card companies - there's no golden rule here, but we've asked the big credit card providers for a rough guide to their policy (don't take these as gospel):

Is it worth keeping any old cards?

Despite the boons available from cancelling, this isn't a clear cut issue. Hanging on to plastic you aren't making full use of right now can have its advantages too.

• Emergency fund. Ideally we'd all like a cushy savings pot to fall back on if you have an unexpected need for dough. Yet this isn't possible for everyone, and if you have debts it makes little MoneySaving sense.

  The reason is simple; if you have debts and savings, the interest paid on savings is usually far less than interest charged on borrowing, so paying off debts with savings boosts the cash you have (read Repay debts with savings guide)

  Once done, lock one or two empty cards away strictly in case of a big emergency. If nothing happens you're quids in and can rebuild savings. If it does, use the cards and you're no worse off than at the start,and you'll have paid far less interest in the meantime.
  
  There's a small chance the card provider may cancel the card if you never use it or, worse, charge a dormancy fee, so it may be worth buying something small on the card every few months, and paying it off in full to avoid interest.

• 

  Existing customer deals. Sometimes lenders open their big hearts and offer cardholders a stunning deal. Well, the second part's true - the reason's that they want you use the card more & boost their profit (see the best cards to keep).

  It's a tough balance, these deals rarely match the best for new customers, but the added bonus is they don't need a credit check. Weigh up your chance of getting new cards; have you missed payments or been turned down lately?

• Extra protection when you spend. If you have no other credit cards, it's worth knowing that when you buy something costing £100+ (and under £30,000) on one, the card company is equally liable with the retailer if there's a problem, so hanging onto yours may give useful protection. Full details in Section 75 guide.
  
  Actually credit cards can hold a plethora of hidden perks, like extended warranties on electrical goods, so always check yours - read the Credit Card Perks guide

• Rebuild your credit rating. If you've lots of unused cards, cancelling some will likely be a good idea. Yet if you only have one or two cards altogether, and think you may struggle to be accepted for new cards, holding onto one and using it may help.
  
  While cancelling available credit is likely to be a bigger boost to your credit score, by spending on a card and repaying in full every month to avoid paying interest, you can improve how lenders rate you.

• Get cashback & rewards. Check if your card offers cashback or rewards - where you get paid cash or points for spending. This can be nice bonus, but you must always repay in full to avoid being hit with interest - read the full cashback cards guide.

How do I cancel a card properly?

There is a big confusion here, and the only way to dispell it is to shout loud...

Cutting up a card is NOT the same as cancelling!

Snipping your plastic in half simply stops you using it, but has no positive impact for you as a customer. Instead call up the card company and tell them you want to cancel the account. If possible request confirmation of cancellation in writing, as sometimes they don't action it.

Yet, even once you've cancelled it doesn't mean the account is closed. It'll often be left open for a bit in case any payments still need to come through, so always double check your final statement to ensure everythings gone through then call up a few months later to double check it's done and dusted.

In other words, just to make things difficult, cutting up doesn't mean cancelling, and cancelling doesn't always mean closure.

Funnily enough the mere attempt to cancel may reap rewards. Often when you do this the credit card company will try and tempt you to stay with some form of special offer deal. It's always worth examining, especially for those still needing to borrow.

Are any cards better to keep than others?

Whilst the very best deals are still reserved for new customers, existing customers can access good deals too. Some do this more than others. so it's worth knowing the right cards to keep your claws on.

Most of the deals on offer are reserved for balance transfers (debt shifted to the card from another card) rather than for existing debts on the card. To take full advantage, it's useful to keep two cards, so you can shift debt away from the card then back again to bag the cheap rates (read the Credit Card Shuffle).

Here are some deals we have heard anecdotal evidence of MoneySavers getting from their lender - so all are rough and not guaranteed. Please let us know any more you've had in the Existing Customer Offers discussion.

Keeping these cards is a good safety net in case of credit score problems. It means if you start getting turned down for cheap credit you have these cards there.

The scale of these providers means customer retention is crucial, so while it's never guaranteed that you'll be blessed with an offer, it's likely they'll continue.

What if I haven't got any debts?

The main focus of this Q&A has been how to retain access to good 'balance transfer' deals, to cut the interest you pay on existing debts. However, if these aren't an issue for you, it's likely the best credit cards for you come from a totally different range.

Have a gander at the following guides for which card is best for each type of purchase: Best Card for Spending, Best Balance Transfers, Best Cashback Card, Best Card for Overseas Spending, and the cards to use to make free cash.