How to cancel a credit card
Should you cancel old cards, and what's the impact on your credit rating?
If you've got credit cards you're no longer using, is it best to cancel them? Often, but not always – sometimes it's better to keep certain credit cards open. This guide takes you through the pros and cons of cancelling... and tells you which cards you should, and shouldn't, keep.
Should I cancel old credit cards?
There isn't a single answer to this. Sometimes it's best to cancel, and there's no downside. But other times it's not a good idea, and could even mean you find it harder to get credit in future. Here's what you need to think about:
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Are you likely to need a credit card in future? If it's your only credit card, it may be that you want to keep it 'just in case'. Credit cards can be helpful, for example, in emergencies or on holidays for car hire deposits (debit / prepaid cards often aren't accepted).
Credit cards also give vital extra consumer protection on anything you buy on them that costs over £100, through the powerful Section 75. Do you want to give these benefits up? -
How often do you check your old card accounts? If you rarely or never check them, then having unused cards could mean you're more susceptible to fraud, as you likely wouldn't be aware if someone stole and used your card. If this is you, it's likely better to cancel, so you have peace of mind.
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Is your card from a provider that offers rewards to new customers? This is often a big reason to cancel a card. If you have a card from a particular provider, but notice it's doing big introductory offers for new customers, you usually can't access these. But, cancel your card and within a certain time period, you'll regenerate as a new customer.
For example, American Express sees you as a new customer if you haven't held one of its cards for two years, but for most providers, you qualify for top offers within six to 12 months. -
Does the card charge an annual or monthly fee? Most don't, but if you have one that does, and you're not using it, then you're usually paying just for the pleasure of having the piece of plastic in your wallet. Cancel immediately (unless paying the fee gives you access to other services or rewards that you DO use).
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Will cancelling the card make it harder for you to get credit in future? Sometimes when you cancel a card, you'll see your credit score drop. This often isn't a problem, especially if you've other debts you're paying off and managing well. But, some cards are better to cancel than others – we've a full section below on which cards will affect your creditworthiness if you cancel.
How do I cancel my credit card?
There is a big confusion here, and the only way to dispel 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 the credit card will still be open, and will show as active on your credit report. To properly cancel your credit card....
Check you don't owe anything. If you still have debt on the card, you need to pay it off (or do a balance transfer to a different card).
Tell the card provider you want to cancel. A few will let you do this online, but you'll usually need to call or use the online chat and ask the lender to close your account.
Cut up your credit card. This is the point in the process when it's usually okay to cut your card up, and your lender will usually tell you to do it (a rare few may want the card sent back). The reason to cut it up is to stop anyone picking it out of your bin and using it. You may even want to put the pieces in different bins (did someone call us paranoid?).
Check your credit report(s) to ensure the account is fully closed. It's best to diarise to do this a few months after you ask for it to be closed. This is because the lender will keep the account open for a few weeks to ensure no more payments come through. Plus, credit reports are usually only updated monthly, so data can be up to 10 weeks' old by the time you see it. See how to check your credit reports for free.
If the card is still listed on any of your credit reports as still open, contact the lender to ask why. If it doesn't then correct the information, see how to dispute wrong credit report info.
Cancelling your credit card may reap unexpected rewards...
Funnily enough the mere attempt to cancel may reap rewards. Often when you do this, the credit card company will try to tempt you to stay with some form of special offer deal. Such offers are always worth considering, especially for those still needing to borrow.
Once your account's closed, that's it. You can't reopen it
It's usually possible to apply for a new card with the same lender, though some – especially if they give rewards or 0% offers – will make you wait before you 'regenerate' as a new customer (this wait can be anything from six months to two years).
Will cancelling a credit card affect my credit score?
Whether cancelling old cards will help or hinder your ability to get credit in the future isn't an exact science.
In general, if you have a lot of old cards that you're not using, you should look to cancel some of them, especially if you don't check them often, as they could be used fraudulently. However, there are cards you should try to keep...
The card that has your highest credit limit. This card is likely to be seen as positive on your credit report, as it shows that other lenders trust you with a large amount of credit. It's best not to close this card unless you've other cards with similar limits.
The card you've had the longest. Lenders like to see stable financial relationships on your credit report. So, if you'd had one card for 10 years, and all your others are less than a couple of years old, shutting the old card will likely have a slight negative effect on your creditworthiness. If all your cards are of a similar age, this likely won't matter.
The only credit card you have. If you only have one card, it's best not to shut it, as then lenders wouldn't have any evidence about whether you manage card debt well.
If you're not using the card (and you're not paying off other credit elsewhere), it's worth doing, say, £50 of normal spending each month on the card and paying it off IN FULL. This will help keep your credit history current.
It's also worth keeping an unused card if you're maxed out on others
The other reason you might keep a credit card is down to your 'credit utilisation' – this is a fancy way of saying 'how much of the credit available to you are you using?'. It's best to aim for a figure around 25% or less (and it's best if it's not all concentrated on one card).
So, for example, if you're maxed out on two cards with £2,000 limits, and you've also a card with a £6,000 limit that you're not using at all, then your credit utilisation is 40% (you've £4,000 of debt and a combined credit limit of £10,000).
If you closed the £6,000 limit card, your credit utilisation would shoot up to 100% – which would be a real red flag for lenders. They'd likely see it as a sign you're desperate for credit. So here it'd be best to keep the £6,000 card open (and, of course, aim to pay down the debt on the other two cards).
For more on how credit utilisation works (as well as your free credit report, and other nifty credit tools), sign up to our new, improved MoneySavingExpert Credit Club.
Who's this guide for? Anyone who's got unused credit cards and is wondering if they should cancel them.
Other related guides... Check your credit report | Boost your credit score | Debt help. Or, see all our credit card guides.
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