Deleting a credit card account can seem daunting, but it’s often a necessary step in financial management. Closing an unused credit card account that’s costing you money in fees can free up your budget. However, closing an account also impacts your credit score and credit history, so it’s wise to understand the consequences before taking action.
Should I close my credit card account?
Here are some key considerations when deciding whether to close a credit card account:
- Are you paying an annual fee? Closing a card that charges a high annual fee can save you money if you aren’t using the card enough to justify the fee.
- Is the account inactive? Keeping open accounts you don’t use can pose a security risk if the card gets lost or stolen. Closing unused accounts reduces this risk.
- Is the account your oldest credit line? Since your credit score considers the length of your credit history, it’s best not to close your oldest account if you have a short history.
- Will closing the account impact your utilization ratio? Having too high a credit utilization ratio can negatively impact your credit score, so don’t close an account if it brings your overall utilization too high.
Overall, closing an account you no longer need or use can be a smart money move. But consider the impacts to your credit first.
How do I close my credit card account?
You’ll need to contact your credit card issuer directly to close an account. Here are the steps:
- Call your credit card company. Ask to speak to a customer service representative about closing your account. They can walk you through the process.
- Provide information to verify your identity. Expect to confirm personal details like your name, address, Social Security number, and account numbers.
- Ask about any closure fees. Some credit card companies charge fees for closing an account, typically $25-50. Ask if your account is subject to closure fees.
- Consider paying off your balance first. It can simplify closing the account if you zero out your balance before calling.
- Request written confirmation. Ask the representative to mail you written confirmation once the account is closed.
- Destroy your cards. Cut up any physical credit cards associated with the closed account.
It’s that straightforward. The credit card company handles the closure on their end – you simply need to make the request.
How will closing an account affect my credit score?
Closing a credit card account can impact your credit score in a few key ways:
- Credit history length: Closing your oldest credit card can shorten your credit history and negatively impact your score.
- Credit utilization: Having less available credit means your utilization ratio will rise, which can reduce your score.
- Closed accounts: Closed accounts in good standing remain on your credit reports for 10 years, and continue aging for up to 10 years after closure.
As a rule of thumb, avoid closing your oldest credit lines and factor utilization ratios into any closure decision. Limiting accounts closed at one time prevents sudden spikes in your utilization.
Will closing an account hurt my credit score?
Closing a credit card account generally won’t hurt your credit score as long as you follow two rules:
- Don’t close your oldest credit card account – keeping your longest-open credit line prevents your history from shrinking.
- Watch your credit utilization ratio – closing an account lowers your total available credit, so your ratio of balances to available credit will rise.
By keeping your oldest card open and limiting closure impacts to your utilization ratio, you can often close newer and inactive accounts without damage to your credit score.
How long do closed accounts stay on your credit report?
Closed credit card accounts typically remain on your credit reports for 10 years after being closed. Here are some key facts about closed accounts on credit reports:
- Closures stay on your credit report for 10 years from the date of closing.
- The account will continue to age for up to 10 years after closing, boosting your credit history length.
- Accounts closed in good standing are marked “Closed” on your credit reports.
- Accounts close due to delinquency are marked “Closed by Credit Grantor.”
So you can expect a closed credit card account to remain visible on your credit report for up to 10 years. Closed accounts in good standing continue to age and contribute to your history length during this time.
When do closed accounts stop impacting your credit?
Generally, a closed credit card account stops impacting your credit score once it falls off your credit reports after 10 years. However, there are a few exceptions:
- The account closure date extends your credit history for up to 10 more years.
- Major negative marks like collections or charge-offs associated with the account can impact your score even after the account falls off your reports.
- Your credit utilization ratios may be impacted in the long-term by losing available credit.
So while closed accounts themselves stop impacting your score after 10 years, ripple effects on your history length, credit balances, and negative marks can persist longer.
Can you reopen a closed credit card account?
In most cases, you cannot reopen a credit card account after closing it. Here’s some additional detail:
- Issuers typically do not allow reopening closed credit card accounts.
- You would need to open a new account and apply for a new card.
- Any signup bonuses and rewards programs would not carry over to a new account.
- You may be able to reinstate your credit limit if you close an account by mistake soon after closure.
Unless you identify a closure mistake within days, you cannot reopen closed credit card accounts. Your only option is to apply for a new account with the same issuer.
What if I closed my account by mistake?
If you close a credit card account by mistake, act quickly to have the closure reversed:
- Contact the credit card issuer immediately.
- Ask to have the account reinstated if it was very recently closed.
- Be prepared to explain the circumstances of the accidental closure.
- If successful, the account closure will be reversed.
- If not reversed quickly, you will need to open a new account.
The faster you act, the more likely the issuer can reinstate the closed account. Waiting weeks or months usually means applying for a new account.
Conclusion
Closing a credit card account is a significant financial move that can simplify your budget but also impacts your credit. Think carefully about your reasons for closure and consider alternatives, like product changes, before closing your oldest or largest credit lines. For accounts you do close, monitor your credit reports and utilization ratio to minimize score impacts. With prudence and patience, closed accounts can be managed for long-term credit health.