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Decided that you need a divorce -- from one (or all) of your credit cards?

There are steps you should take before canceling a credit card -- it's not something to be done hastily. The right way to close out a card involves assessing your spending, asking yourself the right questions, and minimizing any potential damage to your credit score.

Take these steps to cancel a card cleanly, so you won't regret it.

1. Make sure you're canceling for the right reason

Picture showing pretty woman shopping online with credit card
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Cancel a card if you can't control yourself with it.

These are the reasons you might nix a credit card:

  • If your debt is unmanageable and you can’t resist the temptation to spend.
  • If the card has an exorbitant interest rate, and you've found one with 0% APR.
  • If the card charges an annual fee that's taking a bite out of your income.
  • If the card’s rewards program has changed or expired.
  • If the card’s terms have changed and you’re suddenly stuck with unwanted fees.

If the above reasons don’t apply to you, it may be best to leave the card open and not use it. Canceling the card could hurt your credit score in more ways than one.

The existing balances on your other open accounts may cause what's called your "credit utilization rate" to artificially shoot up, negatively impacting you in the eyes of creditors.

If you opt to cancel a credit card, close the newest one or the lonely card you use the least.

2. Consider keeping the card to build credit

Hands holding plastic credit card and using laptop
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There's no harm in keeping a credit card open with something as small as a Spotify subscription.

Keeping a credit card open means you’re still building positive credit, even if your account is mostly dormant. You get dinged only if there’s an existing balance on the card that doesn’t get paid off, so make one small purchase a year and pay it off right away — or throw your Netflix subscription on it.

The longer you have good credit, the better you look as a candidate should you ever apply for a loan, mortgage, even a new job.

If the account is active and you’ve been nailing your payments on time, your credit is considered in good standing; closing the card could erase years of good credit and skew the average age of your accounts.

Consider keeping the account open, but putting the card in a drawer at home where you can’t access it.

Read all of the above and still want to cancel? No worries, we’ll walk you through how to do it effectively.

3. Don't let rewards die with the card

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Take advantage of all your card's rewards.

Many credit cards have some sort of points program — especially if the card is tied to a store rewards program like the Target REDCard.

Before you make a move to cancel, make sure you take advantage of the rewards you’ve accumulated.

Check the card or company website for details on how to redeem — and don’t cancel until you’ve milked all the rewards.

The best cash-back cards have the easiest redemption features.

4. Pay off your balance

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Be sure that your balance is paid off before you attempt to close out a card.

Unfortunately, canceling a card will not magically erase mountains of debt. (We wish!)

You’re still on the hook for the card’s existing balance, and failing to pay it off could torpedo your credit score.

Even if you transfer your debt to a balance transfer credit card, you could be hit with additional fees. Pay your card’s outstanding balance in full before making the move to cancel.

5. Cancel all automatic billing

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Review your bills carefully.

Make sure to cancel any recurring payments or bills linked to the card. This step is crucial.

If a merchant or service provider later tries to charge your closed account and the transaction bounces, they could report you to the credit bureau for nonpayment, which damages your credit score for up to seven years.

Additionally, you may be charged late penalties after 30, 60 and 90 days.

Creditors don’t like to see missed payments and late fees, so don’t let those long forgotten automated bills put you in the red.

6. Make a goodbye phone call

Woman on the phone in her home office, in front of the computer.
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Calling the company helps tie up any loose ends.

Call the credit card company’s customer service number, usually found on the back of the card or on a statement or bill. Let the customer service rep know that you’re ready to cancel.

You will likely be asked why you’ve decided to close the account. You can give any reason you like. Ultimately, this is your decision. You’ve already weighed the pros and cons, so by this point you should feel confident that canceling is the right decision for you.

The agent will likely try to talk you into keeping the account, but stay firm. Keep a recent statement nearby so that you’re prepared to answer any questions the representative may have.

When you’re done, make certain that you receive confirmation of the cancellation in writing.