What's the Right Way to Close a Credit Card?

The logistics of closing a credit card are actually quite simple: Call your card issuer’s customer service phone number and request an account closure.

Whether you should be closing that account is a more complicated matter, and it’s a decision during which a lot of consumers make choices based on misconceptions that could damage their credit standings. Here are a couple things you need to know before deactivating a credit card account.

Will It Stay on Your Credit Report?

Credit card history, whether the account is open or closed, will remain on your credit report for many years. Positive history from an open account can be reported indefinitely, but negative information, like a late payment, can be reported for seven years. After you close the account, the good information will age off after about 10 years.

Sometimes, people check their credit scores and see a message saying they have too many revolving credit accounts (as opposed to a good mix of installment loans and revolving credit), which prompts people to close cards to maintain a better balance. (You can check your credit scores for free on Credit.com to see how your accounts are impacting your credit.)

“It doesn’t care how many open cards as opposed to closed cards, if a score says you have too many accounts” said Barry Paperno, a veteran of the credit reporting and credit scoring industry. “If it doesn’t tell you you have too many ‘open’ accounts, then closing isn’t going to help.”

Will Closing a Credit Card Hurt Your Credit?

One of the things that most influences your credit scores is how much you use your available credit (aka credit utilization). This is an overall look at your credit limits in relation to the balances on your credit cards — ideally, your balances take up less than 30% of your available credit.

If you close a card with no balance but are using other credit cards, you’ve lowered your overall credit limit without lowering your balances, and that will increase your credit utilization, which could hurt your scores. If you close a card that still has a balance, you won’t hurt your credit utilization until after you’ve paid off the card, Paperno said. The issuer will continue to report your credit limit as it was at the time you closed your card until the debt has been repaid.

Closing a credit card you’ve had for a long time could hurt you, too. Your average age of credit has a significant impact on your credit score (not as much as utilization or on-time payments), so closing a card means you’ll eventually lose any positive history associated with it. It won’t happen immediately — good information on a closed account can be reported for 10 years after the account has been closed — but if you’re thinking of closing one of your oldest cards, consider how it will affect you eventually.

“Utilization is always the biggest reason not to close cards in the short run,” Paperno said. “And in the long run, it means the card will be removed from your credit report.”

This isn’t to say there aren’t good reasons for closing a credit card — there are. For example, if you have a joint card with someone you no longer want to share an account with (if you’re going through a divorce, for example), or if a card you don’t use anymore carries an annual fee that just isn’t worth it, it’s very practical to close the card. Additionally, if you’re constantly falling into credit card debt, it might be time to take drastic measures to make sure it doesn’t happen anymore. You know yourself: If you can’t resist the temptation to use your credit card even when you’re not sure you can afford the purchase, the negative consequences of closing credit cards may be worth staying out of debt.

If you’ve taken into account the impact closing a card will have on your credit, as well as all the reasons you want to close the account, you should feel confident in whatever choice you make.