How to cancel a credit card

Check out our step-by-step guide to cancelling your credit card and what you should think about before you decide to cancel.

Kelly Whybrow Content Writer
3
minute read
posted

What are the benefits of cancelling a card?

If you contact your card provider with the intention of cancelling your card, and you’ve shown yourself to be a good customer, they may offer you enticing deals to stay. This could include bonus rewards and competitive interest rates.

If you don’t use your card, you might actually improve your credit score by cancelling it. Your credit score is determined by your ability to use credit responsibly, so if you have credit available to you that you don’t appear to be using, then lenders may not see you as a good candidate to lend to –which can negatively impact your credit score.

couple on the phone to their bank

What are the disadvantages of cancelling a credit card?

A disadvantage of closing a credit card is that it can impact your credit score if you already have high balances on outstanding credit, such as loans and credit cards. The aim is to only use 25% of the credit available to you. Lenders don’t want to lend to those with a utilisation ratio of 100% - you’ve maxed out all your credit, and they don’t want you to have 0%.

A good credit score can be determined by only using a portion of the credit available to you, also known as the utilisation ratio.

However, this is just a guide and will vary on each lender’s risk appetite. Lenders may extend credit where there is high utilisation, they may do it at a higher interest rate or lower credit limit. 

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