Should You Close a Credit Card? Here’s How to Tell

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Like many people, you probably have a wallet full of plastic.

However, you also probably only use the same couple of credit cards. So you might be looking at your unused cards and thinking that closing some of them is a smart money move.

But closing a credit card account (or not) can have far-reaching effects on your finances, ranging from the fees you are paying to your overall credit score.

Does closing a credit card hurt your credit?

Closing a credit card isn’t a direct mark against your credit score or history.

But does closing a credit card hurt your credit in other ways? The short answer is yes. Closing a credit card can affect your credit history in ways that could lower your credit score.

The biggest effect it could have is on your credit utilization, which is a measure of how much of your available credit you’re using.

Basically, if you close a credit account, it can lower the credit available to you. It’s something to watch for if you’re carrying a credit card balance.

Other factors like your credit card payment history and other kinds of credit or loans you have can also affect whether closing a credit card hurts your credit.

On the other hand, having a lot of credit cards is not that harmful to your finances or credit. In fact, consumers with the highest credit scores have an average of seven credit cards, more than those with lower credit scores, according to Credit Karma.

Reasons to avoid closing credit cards

If you’re considering closing a credit card, take a look at your credit cards and see how they affect your spending and credit.

There may even be some valid reasons to keep your credit card open, even if you feel like you have plenty.

You only have a few credit cards or loans

If you don’t have many credit cards or loans, closing one of them could have a negative effect on your credit.

Part of having a good credit score is maintaining a diverse mix of credit. So the more kinds of accounts you have on your credit history, the better.

You’re carrying a balance

Second, if you only have a few cards, it’s more likely that canceling one could cause your available credit limit to drop. And if you are carrying a balance, you need to be especially aware of this.

Make sure that if you cancel a card, your balance will still be equal to 30 percent or less of your total available credit.

Your credit cards all have low limits

Many people with lower credit or no credit will have low credit limits on their cards.

Having multiple cards might be the only way to add up a decent available credit amount. And the more available credit, the better your credit utilization ratios.

You have a long, positive payment history

If you’re looking to close a credit card, try to skip the accounts you’ve had the longest.

The age of a credit card account is actually favorable. Keeping open the credit card you’ve had the longest can benefit your score.

You have a big loan or purchase coming up

A credit score dip from closing a credit card is usually short-lived. You can recover if you keep up with other positive borrowing behaviors. However, this might take some time.

So if you’re planning on needing a high credit score in the near future, try to put off closing your credit card. Wait until your new loan, rental application, or other purchase is processed.

When to consider closing credit cards

While closing a credit card has its downsides, there are also some good reasons to make the move. Here are some signs you should cancel a credit card.

You’re spending too much

If you’re regularly spending more than you earn each month, closing a credit card might be smart.

Credit cards can actually lead to more spending, compared to paying with cash or even debit cards for everything. If your monthly credit card charges put your budget in the red, it might be time to ditch some accounts.

You’re concerned about credit card fraud

If you credit card account has had fraudulent or unauthorized charges, that could be a sign you need a new one.

Additionally, the more accounts you have, the more exposed you could be to identity thieves. So if you’ve had issues with credit card fraud in the past, closing a credit card could help you protect yourself from future incidents.

You’re sharing an account with an ex

Lots of spouses or family members might share a card. But it can become a problem if the relationship ends or one of the account holders is getting a bit out of hand with spending.

What’s more, you could be on the hook for any spending on the account by an authorized user you no longer trust. Closing the credit card could be justified in order to avoid contention and getting stuck footing the bill.

You’re paying high annual fees

When deciding whether to close a credit card, pay attention to the annual fees you’re charged for it.

Annual fees on credit cards can range from zero dollars to a couple hundred. So if you have a credit card with a high annual fee that you don’t frequently use, closing that accounts could be worth the savings.

You’re not using the rewards

One in five credit consumers has a credit card that doesn’t align with their current spending habits, according to a 2016 J.D. Power credit card survey.

If you don’t do a lot of flying, for example, an airline credit card might not make sense for you anymore. Or, maybe you aren’t spending enough every month to get cash rewards to compensate for the annual fee of another card.

Comparing your spending to what kind of cards you hold can help you identify credit cards that might be better closed.

How to close a credit card

After looking at your finances, you might decide it’s time to let a credit card go.

But the process for how to close a credit card is a little more complicated than simply cutting it up. Luckily, this handy worksheet can help you through the process of closing a credit card.

First, you’ll want to settle any outstanding balances on the account. You can pay it off with cash, or set up a balance transfer to move it to another credit card. This would also be a good time to cash out any rewards you’ve accrued.

Next, call your credit card company and inform them that you are closing your account. Make sure they will list the account as “closed at customer’s request” on your credit report.

You should also follow up in writing with a letter restating your requests to close the account. Make sure you also ask for written confirmation that the credit card is canceled.

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.