Can You Close A Credit Card With A Balance?


A rising credit card balance can lead to financial trouble. Furthermore, interest rates often make debt more difficult to manage. 

Letting the debt snowball can end up hurting your credit score and impacting your ability to obtain a loan. Some people consider closing their credit cards with balances to get out of debt, but you’ll still owe the money remaining as your balance. 

Even though you’re still responsible for the balance, many people consider closing their credit card instead. Keep reading to engage in a discussion about when it makes sense to close a credit card and what happens to the remaining balance if you do so.

What happens when you close a credit card

The first thing you may notice when you close a credit card is that you can no longer use it to make purchases. You’ll have to use another resource to pay for goods and services. 

You’ll avoid annual fees

Some credit card companies charge their cardholders annual fees. However, you can find several credit cards that do not come with annual fees if you want to avoid this type of cost. 

Using your new card and closing your old card will create more space in your budget. However, closing an older credit card can have an impact on your credit score, even if it is a subtle one. If you want to close a credit card to avoid annual fees, you should consider doing so at a time where you don’t need to have your score checked, such as when taking out a loan or applying for refinancing.

You won’t be tempted to use the card

Since you cannot purchase products or services with a closed credit card, the card won’t tempt you. Even if you wanted to spend extra money, your card’s status would keep you in check. Removing the temptation can curb negative spending habits and help you save money.

You’ll still need to make payments 

Even if you close your credit card, the debt associated with a closed account does not vanish. You still have to repay any debt that you incurred while the credit card was still active. 

Consumers with closed credit cards can repay credit card debt the same way they did when the cards were still active. You can write a check or make payments directly from your dashboard. This is good to know because delaying debt repayment can further hurt your score.

Your outstanding balance will still accrue interest

Credit cardholders cannot evade interest by closing their accounts. You should still work on paying off your balance and making progress on the principal. So, while closing a credit card will not help if you want to escape debt without paying it back, closing your account can stop you from impulsively spending.

You may lose your rewards

You may lose travel points and various other perks on your credit card. If you plan to close your credit card, use as many of your current rewards as possible. Convert your points into cash for purchases so that you can save money and make more progress on debt payments.

You’ll have fewer accounts to manage

Closing your credit card gives you one less account to manage. Some consumers like the simplicity of only managing a few credit accounts. It’s possible to lose track of credit card payments and other obligations if you have too many accounts, so closing accounts you either don’t use or no longer want can be beneficial in this way. 

How closing your credit card can affect your credit score

Closing your credit card isn’t necessarily great for your credit score. A closed account will reduce your credit history, which is a factor that makes up 15% of your score. 

Closing the account will also wipe out the line of credit that you used to make purchases. While this feature prevents credit card temptation, it can also hurt your credit utilization ratio since you will still be holding onto the debt associated with the credit card. 

Closing your card without paying the debt can put you at risk of raising your credit utilization ratio above 30%, at which point your debt will start to hurt your score. You can only improve your credit utilization ratio by repaying debt or acquiring more credit. This is important because this ratio makes up 30% of your credit score.

Should you close a credit card account?

Closing a credit card account does not make sense for most people. You can always leave a card open and simply vow not to use it while you work on paying off your debt. 

Closing your card will also have a negative impact on your credit score. Here are some viable alternatives that can help you avoid closing your credit card.

Switch credit cards

Consumers look for products and services that combine quality and affordability. They want the best possible option, and you may find a credit card with better interest rates and no annual fees. 

If you overpay for your credit card and the rewards aren’t that great, switching makes sense. But even so, you don’t have to close your old account. You can stop using the old credit card and focus on the new one instead. 

All of this said, credit cardholders with high annual fees on their old cards may want to consider closing their card if they don’t intend on applying for loans in the foreseeable future. 

Consider a balance transfer

Transferring your credit card balance to a new card lets you capitalize on introductory APRs. Many credit card companies use 0% APR windows to welcome new cardholders as well. That way, you can enjoy zero interest on your credit card debt for over a year, giving you time to chip away at the principal without accruing more interest in the process. 

Work to pay down your balance

You will have to pay down your balance regardless of which path you pursue. Exceeding the minimum payment and reducing your expenses will help you make respectable progress with your debt.

Some consumers pick up short-term side hustles to pay down credit card debt faster. While some side hustles can be transformed into full-time opportunities, others act as short-term solutions that allow people to obtain the additional funds they need to pay off their debt. 

Side hustling is a useful skill that can raise your income potential, which is beneficial for many reasons. 

Consider how you use the credit card

When you close a credit card, you will no longer be able to use it as you did in the past. This can lock you out of rewards, including cashback, travel points and a number of other perks. 

However, if you have a tendency to overspend, closing your credit card can help you monitor your finances and get closer to paying off all of your debt without accruing even more.

Closing a credit card is rarely the right choice 

Closing a credit card can help you keep your negative spending habits at bay, but it’s not a cheat code that makes it easy for you to get out of paying back your credit card debt. You will still owe the remaining balance, and your credit score will take a hit, even when you pay off the balance. 

Keeping an old credit card open strengthens your credit history and your credit utilization ratio. If you want to close a credit card to get out of debt, don’t bother. You will have to pay the debt regardless, and it will only harm your credit score in the process. 


How much does your credit score drop when you cancel a credit card?

Your credit score can drop by a few points if you cancel your credit card because closing your credit card will reduce the extent of your credit history. Your score can also take an additional hit as the result of a less favorable credit utilization ratio. However, this credit score drop is different for each consumer.

Is it better to cancel unused credit cards or keep them?

It is better to keep unused credit cards active since the credit history of the cards and their impact on your credit utilization will still affect your credit score, though in positive ways.

Should I close my credit card account after I pay it off?

You should only consider closing your credit card if you spend impulsively or have high annual fees on a card you do not use.

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