Thinking about cancelling an old credit card? You’re not alone. Many people wonder if it’s a smart move, especially when they’re applying for a new card. Before you cut up your old plastic, it’s important to look at the potential impact on your credit score, your overall finances, and your future credit card approvals. Let’s take a realistic look at what you should know and how to make the best decision for your situation.
How Cancelling a Credit Card Affects Your Credit Score
One of the biggest reasons people worry about cancelling an old credit card is the effect on their credit score. Credit scores are influenced by factors like your total available credit, credit utilization, average account age, and your credit mix.
- Credit Utilization Ratio: This is the portion of your total credit limit that you’re using. If you cancel a card, your total available credit goes down. This can increase your utilization ratio, which may lower your score.
- Average Age of Accounts: Older credit cards make your credit history longer. Cancelling your oldest card can shorten your average account age over time, which may negatively affect your score.
- Credit Mix: Lenders like to see you can manage different types of credit (like cards, loans, etc.). Cancelling a card could affect your credit mix, though this is a smaller factor.
When Cancelling Might Make Sense
There are times when cancelling an old credit card is a reasonable choice:
- High Annual Fees: If you’re paying a fee for a card you no longer use and the benefits don’t outweigh the cost.
- Unused Card with No Perks: If the card offers no rewards or perks and you want to simplify your finances, especially if it’s not your oldest card.
- Security Reasons: If a card is lost, stolen, or you suspect fraud, it’s sometimes best to close it after discussing options with your card provider.
When You Should Consider Keeping Your Old Credit Cards
Keeping an old card open — even if you don’t use it — has its rewards:
- Longer Credit History: Your oldest card helps boost the age of your credit accounts, which helps your score over time.
- Lower Utilization Ratio: Old cards increase your total available credit. Even if you rarely use them, they help keep your utilization percentage low. This is particularly important if you’re planning to apply for a new credit card online soon.
- Emergency Backup: Having an extra card can be helpful for emergencies or as a backup for travel.
- No Annual Fee: Cards with no annual fee are often worth keeping, as they don’t impact your wallet but help your score.
Alternatives to Cancelling: What Else Can You Do?
If you’re considering cancelling mainly because you don’t want to pay a fee or you rarely use the card, try these options first:
- Ask your card issuer for a product downgrade to a no annual fee version.
- Use the card for a small purchase every few months, then pay it off. This keeps the account active with minimal risk.
- Ask your lender to waive the annual fee — some will do this to keep your business.
Timing Matters: Should You Cancel Before Applying for a New Credit Card?
It often makes sense not to cancel your old card right before submitting applications for new credit cards. Here’s why:
- Your credit score could dip when your available credit drops, which can affect your approval odds for your next card.
- Lenders may see recently closed accounts as a sign that you’re changing your credit practices, which can make them more cautious.
It may be better to wait until after you’ve been approved for your new card before cancelling any old credit cards.
How to Cancel a Credit Card Safely
- Pay off any remaining balance.
- Redeem all your rewards and points before cancelling.
- Contact customer service to close the account officially — don’t just cut the card.
- Get written confirmation that your account is closed.
- Monitor your credit report a couple of months later to make sure it is reported correctly.
Real Examples: How Credit Card Closure Impacts Different Situations
Here are some typical scenarios where credit card closure can have varying effects, depending on your financial goals:
- If you’re eyeing premium or travel cards like the HDFC Regalia Gold Credit Card, a slight dip in your score could mean a less attractive welcome offer or even a rejection.
- Cancelling an old no-fee card could make it harder to keep your utilization low, especially if you tend to carry higher balances. This is key if you’re looking to compare credit cards and want the best approval odds.
- If you’re consolidating to focus rewards, keeping an old, unused card open may not have much downside as long as it doesn’t cost you money or complicate your finances.
Frequently Asked Questions
Does cancelling a credit card always hurt your score?
Not always, but it usually causes a temporary drop in your score, especially if it’s your oldest card or if you owe balances elsewhere. If the card isn’t your oldest and you have a strong credit history, the impact is often minor.
How long do closed credit card accounts stay on your credit report?
Closed accounts in good standing typically stay on your credit report for 7-10 years, which can still help your credit history during that time.
Should I keep a credit card open if I never use it?
If the card has no annual fee, keeping it open may help your credit score. Just make a small charge every now and then to prevent the issuer from closing it due to inactivity.
Can I get a new card after cancelling an old one?
Yes, but the timing can influence your approval odds. If you need strong approval odds or want instant credit card approval, consider waiting until after you’ve applied for your new card before closing the old one.
What about cards with fees and no benefits?
It’s usually okay to cancel fee-based cards that give you no value, as long as you’ve considered your utilization and account age first.
Conclusion: Think Before You Cancel
Cancelling old credit cards isn’t always the wrong move, but it deserves careful thought. Consider the type of card, fees, and the effect on your credit score. Use the card occasionally or downgrade where possible. Before making a decision, explore your options with FinWitty’s Find My Card tool or read the latest guides about zero annual fee cards and other smart strategies. Your next credit card—whether it’s for travel rewards, cashback, or instant approval—should work for your long-term needs. Check out more advice at FinWitty.com and take control of your credit journey today.