Many people have a credit card sitting in a drawer that rarely gets used. While closing an unused credit card may seem like an easy decision, it's important to understand how that choice could affect your credit score and overall financial health.
In many cases, keeping an unused credit card open can help your credit score because it preserves available credit and length of credit history. However, if the card has costly fees, creates security concerns, or contributes to overspending, closing it may make sense.
But before you close an old credit card, take a closer look at the pros, cons, and alternatives below.
Closing a credit card can affect two important parts of your credit score: credit utilization and length of credit history. Here’s what could potentially happen if you close a credit card:
So, some people will see little or no immediate change to their credit score when they close a credit card, while others may see a larger impact. How much your credit score is affected, and when, will depend on factors such as your credit utilization and your overall credit history.
While keeping a credit card account open can often benefit your credit score, there are situations where closing it may be the right move.
You might consider closing a card if:
Most importantly, choose the option that best supports your long-term financial goals. Whether you're paying down balances, consolidating debt, or building stronger credit habits, BankFive is here to help you make informed financial decisions every step of the way.
In many cases, keeping an unused credit card open can help your credit score because it preserves available credit and length of credit history. However, if the card has costly fees, creates security concerns, or contributes to overspending, closing it may make sense.
But before you close an old credit card, take a closer look at the pros, cons, and alternatives below.
How Closing a Credit Card Affects Your Credit Score
Closing a credit card can affect two important parts of your credit score: credit utilization and length of credit history. Here’s what could potentially happen if you close a credit card:
- Your credit utilization may increase. Credit utilization is how much of your available credit you're using. When you close a credit card, your total available credit decreases. For example, if you have a $20,000 total credit limit across all of your cards and carry a combined $2,000 balance, your utilization is 10% ($2,000 ÷ $20,000). But if you close a card that has a $5,000 limit and keep your balance the same, your credit utilization will jump to 13% because your total credit limit decreased ($2,000 ÷ $15,000).
- Your credit history could shorten over time. How long you’ve had your credit cards also influences your credit score. A closed account in good standing can stay on your credit report for up to 10 years, but it will eventually fall off your report. Once it does, it could shorten your credit history, which may lower your credit score. Keep this in mind if you're considering closing one of your oldest credit cards, since a longer credit history can help support a stronger credit score.
Will Closing a Credit Card Hurt Your Credit Score Immediately?
Not necessarily. Since closing a credit card does not remove its payment history from your credit report right away, positive payment history on a closed card can continue supporting your credit profile while the account remains on your report, which can be up to 10 years. However, if you close a card with a high credit limit, it could have an immediate negative impact on your credit utilization.So, some people will see little or no immediate change to their credit score when they close a credit card, while others may see a larger impact. How much your credit score is affected, and when, will depend on factors such as your credit utilization and your overall credit history.
When Does It Make Sense to Close a Credit Card?
While keeping a credit card account open can often benefit your credit score, there are situations where closing it may be the right move.
You might consider closing a card if:
- The annual fee no longer makes sense: If you're paying a significant annual fee and no longer receive enough value from the card's rewards or perks.
- You're concerned about fraud or security: If you've experienced repeated fraud issues with a particular card or issuer and no longer feel comfortable keeping the account open.
- The card encourages overspending: If access to a particular credit card makes it harder to control spending or avoid debt.
Alternatives to Closing a Credit Card
Even if some of the above reasons apply to you, it doesn’t necessarily mean you have to close your credit card. There are alternative options that can help you avoid potential credit score impacts, including:- Downgrading to a No-Fee Card. If you're paying an annual fee for a card you rarely use, contact your card issuer and ask whether you can switch to a no- fee version. This allows you to keep the account open and preserve its credit history without paying for benefits you no longer need.
- Freezing or Locking the Card. Many card issuers allow you to freeze or lock a credit card through their website or mobile app. This can be a good option if you're worried about fraud or unauthorized purchases but want to keep the account open. If you decide to use the card again in the future, you can simply unlock it. It’s important to note though that how long a lock can be in place varies by card issuer. While many let you keep a card locked indefinitely, some may automatically lift it after a set period. For this reason, it’s a good idea to check your card issuer’s policy before relying on this option.
- Reducing the Credit Limit. If having access to a large credit line makes you uncomfortable, you may be able to request a lower credit limit rather than closing the account altogether. Just keep in mind that lowering your credit limit could still affect your utilization ratio, so it's important to understand the potential impact before making this kind of change.
How to Close a Credit Card Responsibly
If you ultimately decide that closing a credit card is the right move, taking the following steps can help you avoid surprises and ensure the process goes smoothly.1. Pay Off the Balance. Any remaining balance on the card is still your responsibility, even after the account is closed.
2. Redeem Rewards. Use any cash back, points, miles, or statement credits before closing the account, as they may be lost after a certain period.
3. Update Recurring Payments. Move any automatic payments, such as subscriptions, utilities, insurance, or streaming services, to another payment method to avoid interruptions.
4. Save Important Records. Download recent account statements and any other records you may need in the future.
5. Contact Your Card Issuer. Ask about the account closure process and whether written confirmation is available. Then, request that the account be closed.
6. Confirm That the Account Was Closed. Check your credit report a few weeks later to ensure the account is reported as closed.
Making the Right Choice for Your Credit
Before making a final decision, consider how closing a credit card could affect your credit utilization and credit history. In many cases, alternatives such as downgrading to a no-fee card, freezing the account, or reducing the card’s credit limit could have less of an impact on your credit score.Most importantly, choose the option that best supports your long-term financial goals. Whether you're paying down balances, consolidating debt, or building stronger credit habits, BankFive is here to help you make informed financial decisions every step of the way.