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Old credit cards - How to cancel a credit card
Do unused credit cards affect your credit rating? What are the benefits of cancelling your old credit cards? Read our guide to learn more
There are two main reasons someone think they should cancel their old credit cards, but neither provides an absolutely definite benefit, and can be common misconceptions.
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Firstly, you may think that cancelling unused credit cards could improve your credit score, but we'll also explain why this isn't always the case, and why you may want to keep your old credit cards.
Secondly, you might also think if you cancel a credit card, that it could open up a range of "new credit card customer offers" as the old credit cards may be preventing you from taking advantage of these.
If you're concerned about your credit rating, use the table below to compare credit reports from the main credit reference agencies, or continue reading to see how unused credit cards affect your credit rating.
How to cancel a credit card
It may seem obvious but cutting up your credit cards into tiny pieces with a pair of scissors will not do anything other than stop you from using your credit card.
In order to properly close a credit card account, you will need to phone the credit card provider's customer service line. If your card comes with an annual fee you will still be charged the fee until you cancel the card with the card provider. Simply cutting the card up and not using it for a long period will not cancel the fee. Don't assume that just stopping using the card will indicate to the card provider that you want to cancel it.
This number may appear on the back of your credit card, so don't be too quick to cut your card in half, as you could end up trawling through their website for the phone number and struggling to recall your card number.
It may be symbolic, but cutting your credit cards in half does not mean you are cancelling them
Once you have confirmed with the credit card provider that you wish to cancel your account, your account may stay open a few more days as credit card transactions don't always come through immediately.
Double-check your final statement, as some payments you made before you cancelled may not have appeared on the statement after you decided to cancel.
If in doubt, call again later in the month to check that your credit card balance is fully cleared. It doesn't hurt to be 100% certain the card is paid off and ready to cancel.
Why should you cancel a credit card?
Cancelling your old credit cards can offer more benefits beyond possibly improving your credit score.
Many credit card providers don't like losing customers, so you may find that some will offer you bonus rewards or extra perks in order to keep your custom.
It's worth listening to the offer to stay if there's one, but weigh up whether the credit card will still have a place in your wallet.
If you have no interest in using the credit card again, then having it there collecting dust may not work out for you in the long run.
If you haven't got any debts and your credit score is in good shape, then you may wish to still look into the benefits of cancelling your credit card. This could open up your chances of being approved for a credit card as a new customer.
As a result you could get a range of rewards that are only available to new customers.
If a purchase you made on the card is refunded after you have cancelled the card, don't worry. Your card provider will contact you to arrange a refund - they are obliged to provide these funds to you even if you have already cancelled the card.
Cancelling a credit card for the new customer offer
Another possible perk of cancelling your credit card is that it could allow you to be reconsidered by the same credit card provider as a 'new customer'.
What this means is that, as a new customer, you would be entitled to the new customer offers and bonuses when taking out a new credit card.
The problem with having an old credit card is that it is likely all of your new customer benefits have expired and you are simply using the basic features of the credit card.
There is no general rule for how long it takes before you can cancel to become a new customer again, so do check on your credit card provider's website for details.
Some credit card companies will exclude you from new customer offers for as long as 24 months after you cancel (in the case of American Express), while some will only set you back one month.
Generally the credit card providers with the best new customer offers will make you wait longer after you cancel as these benefits include features like extra-long balance transfer offers or a high rate of cashback. While it would be great to be able to earn a new customer offer every six months, some card providers will make you wait an extended period of time rather than handing out bonuses consistently.
To learn more, read our guide to what affects your credit rating and how to improve your credit score.
Checking your score on an on-going basis can help you eliminate bad habits and improve your chances of getting access to better financial products on the market.
See the table below to compare paid-for and free credit reports from the leading credit reference agencies.
Do unused credit cards affect my credit rating?
The answer to this question is not definitive either way, but the short answer is: probably.
If you have lots of unused credit cards then many lenders will see this as a sign that you do not spend money on credit. This means you are lacking in a debt repayment history.
Having a history of debt repayments goes on your credit file and it shows lenders that you can manage paying debts. They may also be concerned that you have so much credit at your disposal, which you could spend all in one go and lower your chances of being able to repay it on time.
By the same token, if you're spending most of your credit limit on one credit card, providers could see this as a sign of desperation. As a general rule you should try to avoid using up more than 70% of your credit limit all the time.
If you have multiple credit cards, then you may want to spread your spending across them so that you're not near your limit on one credit card. Unless you have great organisation it can be difficult to track all these cards and you might get stung with being charged an annual fee for a card you really should have cancelled but forgot to.
Essentially, if you have too many credit cards, you should probably close a few down, but you don't have to close them all.
And if you're maxing out on one credit card, but not desperate for credit, then you should try using your other old credit cards to spread out your overall spending.
This could improve your credit score, or prevent it from appearing to credit providers that you are desperately in need for credit.
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