Should You Cancel Your Unused Credit Cards or Keep Them?

Quick Answer

In general, keep unused credit cards open so you benefit from longer average credit history and lower credit utilization. Consider putting one small regular purchase on the card and paying it off automatically to keep the card active.

A man holding his leather wallet full of credit cards.

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A crowded wallet and the temptation to spend might have you thinking about canceling unused credit card accounts. In most cases, however, it's best to keep unused credit cards open so you benefit from longer credit history and lower credit utilization (as a result of more available credit). You can use the card for occasional small purchases or recurring payments to keep it active as opposed to using it regularly.

But there are compelling reasons to cancel a credit card, too, despite the potential impact to your credit. If your unused card has an annual fee you can no longer afford, you're concerned about controlling your spending or the account you want to close is relatively new, canceling a card may be a good option.

Here are the basics to know before you cancel an unused credit card.

How Canceling Your Unused Credit Card Impacts Your Credit Score

Closing a credit card can affect your credit score in a variety of ways, and the negative impacts may be especially surprising. Here's what to be aware of so you can make an informed decision before canceling a card.

Positive Payment History Stays on Your Credit Report

Ideally, you'll close your credit card account when it's in good standing, which means you have no late or missed payments in your payment history. A closed account in good standing stays on your credit report for 10 years, and those on-time payments continue to positively impact your credit score during that time.

Increased Credit Utilization

But beyond the positive payment history, canceling a credit card can end up reducing your credit score, at least initially. One reason? Getting rid of a credit card reduces your available credit, and any outstanding credit card debt will suddenly account for a greater portion of it.

For example, if you have a credit card with a $2,000 credit line and another with a $3,000 credit line, your total available credit is $5,000. If you currently have $1,000 in debt between the two cards, your credit utilization rate is 20%.

When you close the card with a $2,000 credit line, your available credit decreases to $3,000. With $1,000 in credit card debt, your utilization rate jumps to about 33%. The amount you owe on your credit accounts—including your credit utilization—accounts for 30% of your FICO® Score , so this change can have a significant impact. Experts recommend keeping your credit utilization below 30% at all times, and the lower, the better.

Decreased Average Age of Accounts

Your length of credit history, or how long you've been actively using credit, accounts for 15% of your FICO® Score. Closing a credit card account—especially the oldest one—reduces the average age of your accounts, and can negatively affect your score.

Again, however, since accounts closed in good standing will remain on your credit report for 10 years from the closure date, they will continue to be factored into the length of your credit history.

Learn more >> What Affects Your Credit Scores?

When Does It Make Sense to Keep an Unused Credit Card?

Consider keeping an unused credit card in the following scenarios:

  • You're planning to apply for a mortgage. Before and during the mortgage process, your goal will be to keep your credit as strong as possible. Since canceling a credit card can lead to a drop in your score, keep your current accounts open and in good standing until you've successfully secured a loan.
  • There's no annual fee. If you're not paying an annual fee, you can continue to benefit from higher credit utilization and a longer average age of accounts if you leave the account open. If you're concerned about the temptation to spend, place the card in a space that's hard to access and don't make the card number easily discoverable.
  • You can reliably make small payments and pay them off right away. In each of these scenarios, the best approach is often to use the credit card occasionally, or to put a small recurring bill—such as a streaming service payment—on the card and pay it off with autopay. Otherwise, an unused card is at risk of being closed, sometimes without much notice, by the issuer.

When to Cancel an Unused Credit Card

Despite the credit consequences, in these circumstances, closing a credit card could be your best course of action:

  • The card carries a high annual fee. If you can no longer afford to pay the card's annual fee, or you're not using it enough to justify the annual fee, consider contacting the issuer to downgrade the account to a no-fee version. In the event that's not available, closing the account is a sensible way to make room in your budget, despite the credit impact.
  • You recently opened the account. Canceling a newer account—one opened in the past few months, for example—will likely have a more limited effect on your credit score when the account is eventually removed from your credit report.
  • You're committed to dramatically reducing spending. If you're truly unable to control your spending and closing the account seems like the only way to appropriately manage your finances, doing so could be worth the short-term credit impact.

How to Cancel a Credit Card

To cancel a credit card, make sure the account is in good standing and take care to move any recurring payments to a new card before closing it. Here are the steps to take:

  1. Pay off any remaining balance on the card. To ensure you close the card in good standing, bring the balance to zero and make all final payments on time.
  2. Set up autopay for recurring payments on a new credit card. Move any recurring payments for utilities or services to a different credit card or payment method. Doing so early in the process will help you avoid late or missed payments.
  3. Request to cancel the card with the issuer. You may have the option to call, email, or chat live with the credit card issuer to request that it close the account.
  4. Destroy the credit card. Your personal data could be at risk if someone finds or steals the physical card. To prevent credit card fraud metal, shred or cut up the card, and if it's metal, ask the issuer for a prepaid envelope that you can return the card in.

The Bottom Line

Keeping credit card accounts open for as long as possible is a smart strategy for building and maintaining good credit, especially if you're planning to apply for new credit in the near future. Evaluate the age of the account and its credit limit before closing it, but take stock of your spending habits and any fees associated with the card too.

Every financial decision is a personal one. While keeping unused accounts open is generally best, you might find that closing one is the better choice for you.