How to cancel a credit card

Before you cancel your credit card account

There are steps to complete before you cancel your credit card account.

Credit cards serve many different purposes, from those for interest-free purchases to those offering airline rewards. But the more you have, the harder it is to keep track of them and the higher the temptation to spend. Therefore, if you’re not using one, it might be time to close it. But be sure you have considered all the options first.

Understand the implications

While having lots of cards open increases the risk of losing track of one of them or of becoming a victim of fraud, you need to understand the implications of closing a credit card.

Closing an old credit card account may harm your credit score. That’s because lenders like to see that you have a track record of being a reliable borrower. Your oldest card best shows that.

Closing an account may also impact your credit utilisation ratio. This is a calculation to show how much of the total credit you have available you are using. As you are closing a card, this will lower the total credit available to you, which could increase your credit utilisation ratio. It’s best not to use more than 25% of the total credit available to you.

Check the outstanding balance

Before you close a credit card, you will need to check the outstanding credit balance and clear it. Once the debt is cleared, you can then close the card. You can check the balance of a card on the credit card statement, either online or on a paper copy if you have one.

Consider the impact on your credit score

There could be a positive or a negative impact on your credit score when you close a credit card. No one has just one credit score and the main credit reference agencies (Experian, Equifax, TransUnion) calculate credit scores by looking at different factors.

If you’re thinking about how to close a credit card without hurting your credit score, according to Experian it depends on the lender. One reason your credit score could be negatively impacted is that your credit utilisation ratio will change. However, the credit reference agencies tend to agree that if your credit score does take a knock after closing an account, the damage will be short term.

Redeem or transfer rewards

Whatever card you’re cancelling, Visa, American Express (Amex) or Mastercard, make sure you redeem or transfer any rewards or points you have earned.

If you’ve collected rewards, such as points to redeem on air travel or cashback, you will need to contact your credit card provider. The process will depend on the provider. It may be automatic or you may have to ask for the rewards to be transferred. You may be able to get cash transferred to a bank account or redeem other rewards in vouchers.

Plan for recurring charges

Before closing a credit card plan how you will deal with recurring charges. You might have subscriptions that take monthly or annual payments from your card. Or you might have it set up for online shopping accounts such as a supermarket or Amazon. Your card might also be connected to a payment service such as Paypal or Apple Pay.

You will need to cancel any regular payments you have set up from your credit card or register another card with the service. You can do this by contacting the company you pay and changing the payment method to an alternative card. Often this can be done online.

Steps to close your credit card

It’s important to follow the correct steps to close your credit card. You can’t just destroy the card or cancel any direct debits linked to it. You must tell your provider you want the card to be closed. 

Credit card providers are regulated by the Financial Conduct Authority (FCA), which means they need to follow strict rules with the credit card closure process.

Contacting your credit card issuer

You may need to contact your credit card provider. The phone number will be on the reverse of your card, or you can send the provider an email. On the provider’s website there should be a section with information on how to close a credit card account online.

Tell your credit card provider you would like to cancel the credit card. It will then tell you what steps are needed to make sure the account is closed.

Writing a cancellation letter

You may need to write a cancellation letter. If your provider asks for written confirmation when cancelling a credit card, you will have to send a letter to the address it gives you stating that you would like the account to be closed. You may be able to do this as an email as well.

Even if you don’t need to send a notice of the account closure in writing, it’s a good idea to do so. That way you have a written record if something goes wrong down the line.

Confirming account closure

Your provider will confirm the account closure, usually in a letter or email. If you are unsure if the account has been closed or not, you can contact your provider for confirmation.

After cancelling your credit card

After cancelling your credit card there are a few final checks you should make to ensure the account is closed properly.

Checking your credit report

Check your credit report after you’ve cancelled your card. It may take up to eight weeks for the account closure to be marked down on your credit report.

Adjusting your credit utilisation

Your credit utilisation ratio will change when closing a credit card. That’s because you now have less credit available to you. Your credit utilisation ratio shows how much you’re currently using of the total credit available to you.

If you had three credit cards with £1,000 credit limits on each (£3,000 in total) and you used £250 on each card (£750 in total), your credit utilisation ratio would be 25%. If you cancel one of the cards and transfer the balance to the other cards, you would still have £750 of credit but only £2,000 available.

That would make your credit utilisation ratio rise to 37.5%. Anything above 25% is likely to have a negative impact on your credit score.

Monitoring your credit score

It’s important to monitor your credit score at least once a month. This is where you can see when your credit card is cancelled. You’ll also be able to see what impact closing the credit card has had on your score.

If your credit score has gone down, because your credit utilisation ratio has changed, there are lots of ways to increase it over time. This includes regularly making payments on time, and not using all of the credit available to you.

Managing your remaining credit accounts

Focus on managing your remaining credit accounts. Make repayments on time and always at least the minimum payment. Keep your credit utilisation low by not using all of the credit in your limit. Managing your credit accounts like this shows lenders that you can borrow responsibly and will push up your score.

If you have lots of credit accounts, setting up direct debit payments to clear them is one way to keep on track. Make sure you never miss a repayment and receive a late payment fee as this can damage your credit score.

FAQs

How soon will cancelling my credit card affect my credit score?

It can take a few weeks before your credit score is updated after you cancel a credit card. This depends on the credit card and the credit reference agency.  Most credit scores are updated monthly so if the notification from the credit card provider misses an update, it won’t show until the next month.

What should I do with the physical card after cancelling?

You don’t want the card falling into the wrong hands, so you should destroy the old credit card when the account is closed. You can do this with a shredder (if you have one) or by cutting it up.

Is it good to cancel a credit card I never use?

It might not be a good idea to cancel a credit card you never use. You may damage your credit score in the short term, as you will have less available credit when you close the account, for example. It is also worth keeping your oldest credit card as this shows you have had credit for a long time and can boost your credit score.

How to cancel a credit card: final thoughts

While it may be easy to cancel a credit card, you should think carefully about the reasons for doing this. It can damage your credit score in the short term, as your credit utilisation ratio will change, for example. However, there’s also not much point hanging onto a credit card you never use. Whatever your reason for wanting to cancel the account – you’ve found a better deal, for example – carefully weigh up the pros and cons before you do so.