Should You Close Credit Cards After Paying Them Off?

You’ve been under pressure from lingering credit card debt. But the day has come; your hard work has paid off, and your balance is at zero.

Now what? In most cases, you shouldn’t close a credit card after paying it off.

Although your first instinct may be to chop it up into pieces and clog dance on the shards — just to properly vanquish the source of your previous stress — in reality, the smart move is to keep that card open.

Here’s how to tell when closing credit cards after payoff is a good idea (and when you should keep them open).

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Key Takeaways

• The short answer on closing credit cards after payoff is usually no: In most cases, you're better off keeping a paid-off card open, since closing it can quietly drag down your credit score.

• Closing a card shrinks your available credit and raises utilization: With $40,000 in total credit, closing a card with a $10,000 limit drops your available credit to $30,000 — making it far easier to push utilization past the under-30% guideline experts recommend.

• It can also shorten your credit history: Closing an older account can lower your average account age, and the older the card, the more its closure tends to hurt your score.

• Closing can still be the right call in specific cases: An annual fee you no longer want to pay or a real temptation to overspend can outweigh the credit-score downside.

• Look at middle-ground options first: Ask your issuer about switching to a no-annual-fee version, or keep the card open with one small recurring charge to preserve history without incurring new debt.

• Time it carefully if you do close: Avoid closing within a card's first year or within about six months of applying for a mortgage, auto loan or lease, since a temporary score dip could hurt approval.

Summary generated by AI, verified by MoneyLion editors

Why Keeping a Paid-Off Credit Card Open Can Help

If you can help it, you should not close a credit card after paying it off. There are a few simple reasons for this.

Keep Your Credit Score From Dropping

Paying off a credit card can help your credit score, but closing a credit card will reduce your total available credit. This can negatively affect your credit utilization rate (we’ll talk about this in a minute). Closing a credit card can also lower your average account age, which can, in turn, cause your credit score to drop. The older the card, the more severely it’ll affect your score.

Keep Valuable Product Features

Closing a credit card account can come with some headaches. For example, if that card is used for a litany of subscriptions, memberships, utilities and other recurring bills, you’ll need to ensure that you’ve swapped them all over to a new card.

You may also lose rewards that you’ve accrued with a specific card if you cancel before you redeem them. Some credit card rewards programs allow you to transfer the points to another card within the same family, if you’ve got one.

Finally, you may simply appreciate some features about your card, from low rates to monthly or annual statement credits, and you’d prefer not to lose them.

How Closing a Credit Card Can Hurt Your Credit

Can paying off debt hurt your credit score? It can, but usually temporarily. However, closing a credit card can increase your credit utilization — also known as your “amounts owed” — and potentially have a significant impact on your score.

Credit utilization is simply the percentage of available revolving credit that you’re currently using. Say you’ve got $40,000 in credit across all your cards. Your credit utilization would then be:

• 10% with $4,000 in balances

• 25% with $10,000 in balances

• 50% with $20,000 in balances

Experts generally recommend keeping your credit utilization below 30% to maintain a good credit score. But the lower you can keep it, the better. To use the above example, closing a credit card with a $10,000 credit line would immediately drop your available credit to $30,000, making it considerably easier to reach an unhealthy credit utilization rate.

When Closing a Card May Still Make Sense

Credit utilization shouldn’t be the only consideration when trying to decide whether to close a credit card. Some things are more important.

For example, if the card charges an annual fee that you’re no longer willing to pay, you should cancel the card instead of paying it in perpetuity just for the sake of maintaining your available credit. But before you cancel, it’s worth checking whether you can convert the card (sometimes called a product change) to a no-annual-fee version.

Another compelling reason to close the card is if you’re aware of your tendency to overspend. Eliminating the credit line will ensure you don’t abuse it in the future.

When You Should Avoid Closing a Card Right Away

Canceling a credit card is easy in itself, but there is some tact involved in timing.

If you plan to apply for a mortgage, auto loan, apartment lease or other new credit within the next six months or so, it could be worth delaying your plans to cancel until you’ve done so. Again, your credit score may drop temporarily after you cancel, which could decrease your chances of approval. It’s also unwise to cancel a credit card within the first year of account opening. Banks may be hesitant to approve you for future cards if you open and close cards that quickly.

How To Close a Credit Card the Right Way

To close a credit card, pay the balance to zero. Some issuers will allow you to close a card and continue paying off the balance, but the best practice is to do it first. You can then contact your issuer directly via phone call, secure message or chat to request account closure.

You can ask for written confirmation that your account has been closed and that the balance is $0. Then, check your credit report in the coming days and weeks to ensure that the closure is reflected.

Bottom Line

In most cases, you’re better off keeping your credit card account open after you pay it off. It’ll protect your credit utilization rate and credit history, both of which are extremely important factors that make up your credit score. Still, closing your card can be the right move if its annual fee is no longer worth paying — or if you’re afraid you’ll abuse the credit line in the future.

Put simply, don’t close a credit card just because the balance has reached zero. Know the above tradeoffs, and make the smart choice for your situation.

Closing a Credit Card After Payoff FAQs

Should I close a credit card after paying it off?

You should not close a credit card after paying it off unless you’re no longer interested in paying the annual fee. You may also close it if you’re afraid you'll overspend.

Does closing a credit card hurt your credit?

Closing a credit card can hurt your credit score by reducing your available credit and potentially increasing your credit utilization.

Is it better to cancel a credit card or let it cancel itself?

If you fail to use your card for many months, the issuer may proactively cancel it. It’s better to cancel it yourself — that way, you can ensure the card has a $0 balance and you can take care of any other necessary housekeeping.

Key Terms

• Credit utilization rate: The percentage of your available revolving credit you're currently using. Closing a card lowers your available credit, which can push this ratio up. Experts generally advise keeping it under 30%.

• Available credit: The total credit limit across your cards. Closing an account reduces it — for example, closing a $10,000 line on $40,000 of total credit cuts available credit to $30,000.

• Amounts owed: The FICO category that houses credit utilization. Closing a card can increase utilization and meaningfully affect this part of your score.

• Average account age: A measure of how long you've held your accounts. Closing an older card can lower this average and pull your score down.

• Product change (downgrade): Converting a card to a different version — often a no-annual-fee one — with the same issuer, so you keep the account's age without paying the fee.

• Annual fee: A yearly charge some cards carry. A fee you no longer want to pay is one of the clearest reasons to close or downgrade a card.

• Revolving credit: Open, reusable credit like a credit card. Only revolving accounts count toward your utilization, which is why closing one matters.

• Hard inquiry / new credit timing: Applying for new credit can temporarily dip your score, so it's wise to delay closing a card within about six months of seeking a mortgage, auto loan or lease.

Sources

• CFPB: Does it hurt my credit to close a credit card? 

• myFICO: What's in my FICO Scores? 

• CFPB: How do I get and keep a good credit score? 

• CFPB: What is a credit score? 

Summary generated by AI, verified by MoneyLion editors

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