How to cancel a credit card

Whether you have too many cards, you’re trying to limit your spending or you have cards you no longer use, you might be thinking of closing a credit card account. But will this affect your credit score? Check out the pros and cons of cancelling your credit card, and how to go about it.

Written by

Alex Hasty

Insurance and finance expert

Posted

14 JUNE 2021

6 min read

Why cancel a credit card?

There are many reasons why you might want to cancel a credit card. You might have credit cards you haven’t used for a long time and aren’t likely to use in the future. Perhaps you’ve taken out a balance transfer card that you’ve now paid off or have a card where you’re no longer getting the introductory offers you signed up for.

You may have had poor service from the credit card provider and no longer want to use their card. Or you may feel you have too many credit cards and might be tempted to spend more than you can afford to pay back.

On the face of it, it might make sense to cancel a card under these circumstances. But it’s not as straightforward as that, because doing so can have an impact on your credit score – the record that helps lenders decide whether to give you credit.

The alternative to cancelling – just holding on to credit cards but not using them – also has its pros and cons. Let’s take a look.

What are the benefits of cancelling a card?

Cancelling your old credit cards has its advantages. You can:

Simplify your finances
If you have multiple credit cards, it can be difficult to keep track of how much you’re spending and when your bills need to be paid. Sticking to one or two cards can make it easier to manage your money.

Cut the risk of fraud
Having a credit card you’ve half-forgotten about, with a PIN and password you can’t remember and a balance you don’t check, isn’t great for security. In the case of a long-unused card, your lender might eventually get in touch with you saying they’ll close the card but, in the meantime, you’re vulnerable. So cancelling a card can be safer.

Be offered tempting deals to stay
If you’ve been a good customer over the years, telling a card provider you intend to cancel might encourage them to offer you enticing deals to stay. These could include bonus rewards and competitive interest rates.

Benefit from new customer deals
If you haven’t got any debts to pay off and your credit score is good, you could cancel your old credit card and reopen an account as a new customer. By doing this, you could take advantage of rewards that are only available to new customers.

While some credit card providers will bar you from new customer offers for as long as 24 months after you cancel a card, others will only ask you to wait a month.

Alternatively, you could apply for a new card with a different provider altogether. Find the cards you’re most likely to be accepted for using our eligibility checker.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

Improve your chances of getting credit
If you have multiple credit cards, lenders might not see you as a good candidate to lend to. They could worry that you’ll go on a spending spree, use all the credit available to you and not be able to pay it back. So, in certain circumstances, cancelling cards might help you to get credit.

What are the disadvantages of cancelling a credit card?

Closing credit card accounts can have downsides too, so that’s something you’ll need to think about. You could potentially:

Damage your credit score
Cancelling a credit card if you have high outstanding balances on other cards and loans can negatively impact your credit score.

This is because of something called the credit utilisation rate - the portion of credit you’re using out of what’s available to you. The aim is to only use under 30%, or preferably under 20%. Cancelling unused cards increases your credit utilisation ratio and may make lenders less keen on giving you credit.

Lose rewards
Make sure you’re not cancelling a card that has a lower rate of interest, is costing you less in fees or would give you better perks than any cards you’re keeping.

What should I do before cancelling a credit card?

Before you jump right in and cancel a card, there’s a couple of things you might want to do first:

Check your credit history
It’s worth finding out how long you’ve held each of your cards. You can do this by getting a free credit report, which is a summary of how you’ve handled credit in the past. If the card you’re planning to cancel is one you’ve had for years, you might be better off hanging on to it. That’s because stopping it could affect your credit score.

When calculating your credit score, the three credit reference agencies in the UK (Experian, Equifax and TransUnion) take into account the length of time you’ve had a credit account for. A long-held card is a sign that the lender has trusted you for a long period.

If your existing credit score is excellent, cancelling one card might not make much difference to your rating. But if your credit score isn’t exactly flawless, closing a long-held card will reduce the average age of your accounts. This can have a negative impact on your rating.

Check your annual fee
Credit cards often come with annual fees, especially if they earn rewards. If you’re paying an annual fee for a card you don’t use much and you’re not getting value from, it might be sensible to cancel it.

But if the annual fee is the only reason you want to cancel the card, it could be worth contacting your provider. Ask them if they’re willing to waive the fee or switch you to another card that doesn’t have an annual fee. This could let you keep the account open at no extra cost.

Cancelling your credit card

Once you’ve weighed up the pros and cons, you might still decide to cancel your credit card. Here’s how to do it:

Clear any outstanding balance: if you want to, you can apply for a 0% balance transfer card and move the balance over. There’ll be a fee for doing this, but you won’t have to pay interest for a set period of time.
Cancel your card with the provider: you can do this online or by calling the provider directly – the number is usually on the back of your credit card.
Destroy your credit card: once you’re sure that your credit card has been cancelled (this might take a few days to be processed), destroy your card by cutting through your name and the number. This will prevent anyone from using your details to reactivate the card and potentially commit credit card fraud.

Simply grabbing a pair of scissors and cutting up a card doesn’t mean it’s cancelled. You have to go through the steps above. And, once you’re done, check your final statement and your credit report to make sure your account has been closed.

Tips to remember when cancelling credit cards

No one would expect you to keep every card you’ve ever owned, but it’s always worth stopping to think before you bin them. Here’s a few tips:

Spread out cancellations over time so your credit utilisation ratio doesn’t shoot up.
Keep your oldest account open to protect your credit history.
Keep a card with a high credit limit open as this will help keep your credit utilisation ratio low.
Avoid closing credit card accounts just before applying for a loan or a mortgage. If closing your card damages your credit score, it could affect your application.

The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.