How big of a deal is it if I cancel one of my credit cards? I don’t want my credit score to plummet, but the card no longer fits my needs. What should I do?
It is true that closing a credit card can impact your credit score but that isn’t always the case. You should aim to leave your credit card accounts open, even if you’re not using them. However, in certain circumstances closing a credit card account is necessary. You should redeem unused rewards on your account before you cancel and pay off all your credit card accounts to $0 before canceling. Minimizing your balances as much as possible will help you close your card with minimal or no damage.
Yes, canceling credit cards affect your credit score. Ways in which your credit score might be affected:
Age of credit
Credit Utilization ratio
So, it is better for your credit score to keep old credit cards open for as long as possible, unless those cards are charging annual fees that you’d rather not pay.
Alternatives to canceling a credit card:
Transfer your balance to a new card
Upgrade or downgrade to another credit card
You should avoid canceling your credit card. If you no longer need one of your cards, you should keep the account open, especially since having older accounts will boost your credit score. However, if the card’s annual fee is too high, you should consider downgrading your card, negotiating with your issuer to waive the annual fee or transferring your balance to a new card before resorting to canceling your card. If you do decide that canceling your account is right for you, you should do so wisely. You can check out this article for how to do it.
It is also important to note that closing an unused or new credit card will not hurt your credit score, and same goes for a credit card with a low credit limit. Either way, you should consider all options before deicing to cancel your card. Even if you do so and it hurts your credit, your credit score will go back up over time.