Skip to content
United Settlement
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
Professional Debt Relief Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
Qualify For Debt Relief
Professional Debt Relief Programs
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
United Settlement » What Happens When You Cancel a Credit Card?
marcel April 17, 2019

What Happens When You Cancel a Credit Card?

From a behavioral standpoint, it can make sense for an individual to cancel a credit card. The plain truth is that since credit cards are often misused, they are not for everyone.

When credit cards are responsibly utilized as a means to build a track record of timely payments that helps build (or rebuild) a credit score and profile, that’s good. When credit cards are effectively utilized to balance a monthly budget when cash flow runs irregularly, or when a credit card is simply kept on hand for emergencies, that’s good.

When balances on credit cards are kept to a minimum so as to reduce interest expense, that’s also good. However, when credit cards are used to live beyond one’s means and a pile of debt insidiously grows with associated high interest expense – that’s not good.

For many individuals, onerous credit card debt becomes a stressful part of life and it can then become a good idea to simply cancel some or all credit cards. But, what happens when credit card accounts are closed out? What are the pros and cons? Let’s take a closer look.

Cancelling a Credit Card - Pros

Before closing an account and taking the scissors to the card, it’s important to know that cancelling a credit card will not remove the balance owed or the payment history associated with the card – this should be fairly obvious.

After a card is closed, monthly payments must still be made as usual, and the credit card issuer will continue reporting your repayment behavior to the three major credit bureaus (Equifax, Experian and TransUnion).

The primary benefit to closing a credit card account accrues to those individuals who have difficulty controlling their spending habits. Cancelling the card becomes a self-imposed behavioral limit on spending – and preventing oneself from falling into a rising pile of debt is certainly an important benefit to those who need it.

A secondary benefit can come from removing any high annual fees that a card may charge. A high annual fee can simply make holding onto a card not worth the cost.

Cancelling a Credit Card - Cons

When a credit card is cancelled, it will almost always have a negative impact upon an individual’s FICO credit score. This is primarily because of something knows as the the credit utilization rate – or the percentage of available credit that an individual has currently borrowed.

The credit utilization rate is a significant contributing factor (approximately 30%) toward the calculation of a credit score. Lenders prefer a credit utilization rate below 30%, as it illustrates an ability to pay for basic necessities without needing to rely upon credit cards and other forms of debt.

It is important to recognize that since closing credit card accounts reduces the total available credit, this causes the credit utilization rate to rise and the FICO score to drop. The rule of thumb is – the higher the credit utilization rate, the lower the credit score.

Additionally, since the length of credit history is another contributing factor toward calculating a FICO score (approximately 15%), and cancelling a credit card account shortens the average age of all remaining accounts, this also lowers a credit score somewhat further.

The good news here is that in both cases, any reduction in credit score can be temporary and easily recoverable through the timely monthly repayment of remaining debts in the individual’s credit profile.

How to Cancel A Credit Card

If you decide to cancel a credit card, there is a proper way to go about doing things. First off, if you can’t pay your balance in full, look for a balance transfer to a different promotional rate credit card to save on interest expense on the remaining balance owed.

Secondly, redeem any rewards points you may have before closing the account, as you will lose the rewards points once the account is closed. Next, contact customer service and inform them that you will be closing the account.

Confirm any amount of remaining balance and verify that the account has been closed. After sixty days, go to annualcreditreport.com and retrieve one of your free credit reports (you are allowed one from each of the three credit reporting agencies each year) to make certain that the account has been reported as closed.

At this point, you can take the scissors to the card and dispose of it properly, making certain that your name, card number and security code are irretrievable to any potential identity thieves.

Excellent

Based on 356 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Buddy Ewing

December 28

Time and again, I did not know how to handle my debt

Time and again, I did not know how to handle my debt. Even when I paid my credit cards off, a few months later I was back in the same situation. But this year is different. I contacted United Settlement...

Lianne Finnegan

December 27

Business debt relief is what I needed when I contacted the United Settlement crew

Business debt relief is what I needed when I contacted the United Settlement crew. They are committed to helping people like me who requires more help with business debt problems. I had several loans out...

Wren Herrera

December 26

Student loan debt was the reason that I reached out to United Settlement

Student loan debt was the reason that I reached out to United Settlement. I had about 200K plus in student loan debt for my business degree. I recognized that I had to do something when I struggled to make...

Jardel Shah

December 20

There is nothing worse than falling ill and then having to deal with super expensive medical bills

There is nothing worse than falling ill and then having to deal with super expensive medical bills that you really do not have the patience or experience to handle. I was pleased with my experience with...

Iain Holt

December 14

I took out a few personal credit cards to open my boutique

I took out a few personal credit cards to open my boutique. When than money ran out, I went on to take out more loans for my business. However, this quickly turned into a disaster. Today, I now have a mountain...

Avaya Adkins

December 12

Who knew that auto loans were so negative for your credit lines

Who knew that auto loans were so negative for your credit lines? Especially, if they are not paid off right away. As a married couple, we had vowed to keep auto loan debt at bay. But, we found ourselves...

Lucien Rojas

December 07

I didn’t have a ton of debt when I contacted United Settlement

I didn’t have a ton of debt when I contacted United Settlement, but what I wanted from them was some information about how to handle my debt management. I knew that I needed some more information to get...

Madiha Matthams

December 04

Federal student loans were the reason I ended up at United Settlement

Federal student loans were the reason I ended up at United Settlement. I had about $200K to pay back and I was not quite sure where to tackle that debt once I got out of school. But I reached out to that...

Asim Horner

December 03

Everyone knows how horrible student loans are

Everyone knows how horrible student loans are. For me and my family, they had become more than just an annoying monthly bill. They had taken over our lives. That’s why I decided to take action and find...

Frankie Mckee

December 03

I wanted to be more informed about my own personal and business debt

The number one reason I chose to contact United Settlement was I wanted to be more informed about my own personal and business debt. When you have credit card debt, it can be extremely frustrating. Especially...

Justine O'Ryan

November 29

I cannot believe I was finally able to find a company to actually help me pay off my debt

I cannot believe I was finally able to find a company to actually help me pay off my debt! I thought I would forever be chained to debt. But United Settlement offered me multiple solutions for paying off...

Jerry Conley

November 21

What your money can do for you.

The great reviews that you have thanks.

Cathal Brett

November 19

Dealing with high interest auto loan debt was difficult for me and my wife

Dealing with high interest auto loan debt was difficult for me and my wife. We thought we got a good deal, but it actually was a horrible loan. So, we reached out to United Settlement, and they got to work...

Aliesha Ward

November 12

No one really wants to go bankrupt, and neither did my family

No one really wants to go bankrupt, and neither did my family. But fortunately, we did not have to go that route. It was our last resort, but United Settlement helped us figure out a way around bankruptcy...

Filip Rosas

November 08

I had been through about 5 different credit counseling agencies before I found United Settlement

I had been through about 5 different credit counseling agencies before I found United Settlement. I had read through their reviews and made the decision to move forward with them. I also was so impressed...

Susanna Fasenmyer

November 07

Save time and money

Just what I needed, already had a company I was working with and I switched because I was able to same some money. Brian and Alfred were really nice and helpful

Warren Hutchinson

November 07

As a business facing some unwanted financial difficulties

As a business facing some unwanted financial difficulties, we were at a loss for what to do next when our debt started to soar. We took a closer look at our financial situation by contacting United Settlement....

Bobbi O'Quinn

November 02

I had no clue how to create a debt management plan

I had no clue how to create a debt management plan and in fact, I didn't even know what a debt management plan was. Fortunately, I reached out to United Settlement before I had too much debt to tackle....

Dawn Mercer

October 31

Being burdened by debt is one of the biggest struggles we faced as a family

Being burdened by debt is one of the biggest struggles we faced as a family. But these people at United Settlement were very helpful in deciphering the different debts we had and then coming up with a debt...

Forrest Guest

October 29

Student loan debt was my worst enemy before I ran into United Settlement

Student loan debt was my worst enemy before I ran into United Settlement. I really thought I would just have terrible credit for the rest of my life because I will never get out from underneath it. It was...

Are you in debt? we can help

  • Amount
  • Contact

How much do you owe?

Related:

  • Debt Settlement
  • Tax Debt Relief
  • Can You Negotiate Your Own Debt
  • Debt Consolidation
  • Debt Management
  • Contact Us
  • 241 West 30th Street
    3rd Floor
    New York, NY 10001
  • (888)-574-5454
  • [email protected]
  • Privacy Policy
  • Terms & Conditions
  • Debt Relief Services
  • Debt Settlement
  • Business Debt Relief
  • Credit Card Help
  • Debt Consolidation
  • Debt Management
  • Student Loan Help
Learn more about debt relief


    • facebook
    • Google Plus
    • Twitter
    • YouTube
    • Instagram
    • Linkedin
    • facebook
    • Tools & Resources
    • Contact Us
    • About Us
    • Blog
    • Debt Calculator
    • Frequently Asked Questions
    • Sitemap
    • Reviews
    • Client Login
    Free Savings Estimate
    Apply Here
    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 30% including fees, over 12 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us.
    Copyright 2020. United Debt Settlement, LLC