How to cancel your credit card

At a glance

• You can cancel your credit card whenever you wish, but you’ll need to pay the existing balance, any interest and any transactions in progress.
• If you’ve only just applied for a credit card you are perfectly entitled to cancel it during the 14-day ‘cooling off’ period, unless you’ve already used it to pay for any transactions, in which case you’ll need to pay these back as well as any interest accrued.
• Annual card fees may have to be paid in full or as a proportion of the time you have held the card.

Whether you've just taken out a credit card or have decided it’s time to close an old one, it’s important to know how to cancel your credit card properly so you don’t face any unexpected fees or credit score mishaps. This guide to cancelling your credit card will tell you everything you need to know.

Should you cancel a credit card?

This will depend on your own situation, but if you can relate to any of the following reasons, it may be worth thinking about cancelling a credit card:

• If you don’t need/use it.
• You’re worried about being tempted to spend and build up debt.
• It charges a fee and you’re not getting the benefit.
• You have several credit cards already.
• You took out the card because of a 0% offer (either purchase or balance transfer) and have paid off the balance or transferred it to a new 0% deal.
• You want to reduce the risk of fraud or theft.
• You’re not happy with your credit card and/or the provider.

Yet it’s important to make sure you’re confident about your card choice before you take it out in the first place. Make sure that you fully understand what you’re applying for – that means reading the small print thoroughly, and not being afraid to ask your prospective credit card provider additional questions if you’re unsure.

It's also important to satisfy yourself that you're getting a good deal before you apply; this involves undertaking a credit card search to compare what's out there. If you’re still not convinced, read our guide to find out if getting a credit card is the right decision for you.

Cancelling your credit card agreement in the 'cooling off' period

If you’ve only just taken out a new credit card, cancelling should be fairly simple – you have a legal right to cancel the agreement within 14 days without facing financial penalty and without needing to give a reason. This is known as the cooling off period.

If you receive your credit card agreement or credit limit notification after this 14-day period, you have the right to cancel within a day of receiving either of these documents.

However, you shouldn't assume that you can cancel your agreement without paying anything. While you wouldn't face a 'financial penalty' in the form of a cancellation fee, for instance, you will have to pay back any balance you have accrued on the card (and any interest you have accrued in the days you have had this debt). If the card you have taken out charges an annual management fee, you may have to pay some of this proportionally to the length of time you have held the card, or the full annual fee if this is payable at the outset.

Cancelling after the 'cooling off' period

After the cooling off period, you can still cancel your credit card agreement, though it's more likely that you will have a balance on your credit card when you come to cancel – this balance, plus any interest and annual fees, will need to be paid off (or transferred to another credit card) before you can cancel your agreement.

When to keep your credit card

In some cases it might make more sense to keep your card instead of closing it, particularly if any of the following situations apply:

• You have a limited credit history. In this case, keeping a credit card and carefully managing it can actually be beneficial, helping you build your credit history to make it more likely you’ll be accepted for credit – and potentially at a better rate – if you needed it in the future.
• It’s your only credit card. In a similar vein to the above, if this is your only form of credit it may be worth keeping it on hand, both to help build your credit score and to have on hand should an emergency arise.
• You’re using a lot of your available credit on other cards. It’s important to consider your overall credit utilisation ratio, because if you’re using too much of your available credit it can signal to providers that you’re struggling. You should try to use a maximum of 30% of your available credit, so keeping a card open with a zero balance could help bring that ratio down.
• You think you’re likely to need it in the future. If there’s a chance you may need it in the future, it can be a lot easier to keep it for the time being rather than having to go through the application process again at a later date.
• You’ve used your card for a holiday (or flights/car hire etc.) that hasn’t happened yet. If there’s a problem, it should be easier to receive a refund if the card you used for payment is still open.
• You’re planning to apply for a mortgage (or similar) and want to avoid any possible harm to your credit score. If you’re about to apply for a substantial form of credit it can be worth leaving your current credit agreements untouched until everything has gone through.

However, in these situations it’s always important to consider your own behaviour when it comes to debt management. If you think having a card available will be too tempting and you’re worried about getting into debt, cancelling it is probably the better option. But if you know you’ll be able to resist the temptation to spend, it may be better to keep it open, at least for the time being.

Does cancelling a credit card affect your credit score?

It can do, but it isn’t necessarily that simple. Cancelling a credit card may negatively impact your score if it’s your only credit card, or if you’ve had the card for a long time (lenders like to see long-standing accounts, so closing one can mean they’ll view your overall credit history differently).

Cancelling will also reduce your overall credit limit, and so your credit utilisation ratio may increase as a result.

Let’s say you’ve got three credit cards all with credit limits of £2,000. Two of them have balances of £750 and the third you’ve managed to pay off, so you consider closing it.

Yet doing so means you’ll be using 37.5% of your remaining credit limit (£1,500 of the £4,000 available across the two credit cards), whereas if you kept it open but didn’t use it, your credit utilisation ratio would be just 25% (as you’d now have available credit of £6,000).

Given that a high credit utilisation ratio can negatively affect your credit score, it may be worth keeping an unused credit card open if you have several others with high balances on them. This ensures that your credit utilisation ratio will be lower.

However, it’s important to note that the impact of cancelling a card for any reason is likely to be temporary, and your score should recover if you manage your remaining credit and payments responsibly. This means that, if you never use a credit card or you think it could tempt you to get into debt, closing the card is likely to be best option, even if doing so could temporarily harm your credit score. If you’re worried, you can check your credit score to see where you stand, and find other ways to improve your credit score in our guide.

How to cancel a credit card

There are several steps you need to take if you want to properly cancel a credit card. Physically cutting up the card alone won’t work – you need to close the account itself, and here’s how you can do that:

Step 1: Notify your provider

Informing your provider that you want to cancel your card is the first step. You’ll normally be able to do this online or via mobile app, or you may want to phone the provider instead.

Step 2: Cut up the card

Once you’ve informed the provider that you wish to cancel, they’ll normally ask you to cut up the card.

Step 3: Pay off any existing balance

You’ll need to make sure that any remaining balance is paid off (or transferred to another card) before the account can be fully closed. Closing a credit card with a balance is possible, but you’ll need to continue making payments and it won’t show as being closed on your credit report until it’s cleared.

Bear in mind that once a card is closed, you can’t reopen it, and if you want a card with the same provider again in the future you’ll have to apply as you normally would.

Can a credit card company close your account?

Yes, but not unless there’s good reason to do so. Situations where they may decide to close it include fraudulent activity, or if you’ve not kept to the terms of your agreement (such as frequently missing payments or going over your credit limit).

They may also close it due to ‘account inactivity’ – in other words, if you’ve failed to use it for an extended period of time – or if they discontinue the card itself, though in this case they’ll normally offer you an alternative product.

If you’ve been in persistent debt for long period of time – typically 36 months or more – the provider may suspend or close the card as a last resort. However, this will only be after they’ve attempted offering other measures of support, and they’ll always notify you in advance.