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
    • Careers
Debt Relief & Settlement Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Proven Results
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
    • Careers
Qualify For Debt Relief
Debt Relief & Settlement 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
    • Careers
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 377 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Annette Huggins

March 14

That when it seems like nobody can help United will.

This was a great experience for me. I am just starting but Madelene Gallon made me feel like we were friends for years. She tried to make me feel that she would help me and make sure I got the best deal...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Dylan

February 28

Quick, easy assistance!

I've been working with Ben at United Debt to help me organize and get out of debt for once - I've been dealing with debt for ages and Ben showed me some simple ways to begin dealing with things to keep...

Takota Carrie

February 14

I need help

I really appreciate

JONICA Amber PIRON

December 21

Great!

Renika went above and beyond today to help me. She is wonderful to work with! Thank you again Renika for all of your help today! Happy Holidays to you!

Jayvon

December 20

Paying back

They where great listeners

Shawn abetha

December 14

Everything

Thanks

Robert Phillips

November 23

Do your home eork

Paid several thousand dollars and nothing done. Ended up settling 90%by myself. This is a preatory company. So do your homework. This will never post.

Dm

November 18

Customer service is truly helpful

Renika was so helpful. My account was paid off but I kept receiving notifications. She cleared up the situation.

Jose Rosa

November 16

Great Customer Service

Renika did a wonderful job handling my questions and transactions. She is very patient on the phone and took care of my needs accordingly.

Russ

November 03

Very helpful

Renika did a great job in answering all of my questions in a timely manner. She was polite and friendly. Keep her on the payroll.

Anthony Desoto

October 31

What's Important to me is United Settlement Costumer service !

United Settlement Costumer service is Amazing Everyone is Professional . I am so happy choosing them with my card Debt. thank you all for helping me out .

Ri cky

August 23

That this company has integrity!

A responsive company that keeps it clients up to date and fully informed. I like the fact that I can send them a text and be guaranteed an answer within 24 hrs.

Jerry Bolandis

June 04

Professional and focused on facts and truth not hype. Excellent. We want to know facts.

Great work very professional and great updates. Communication is excellent.

janice head

October 25

trust them

Excellent. Also each time i call there they treat me with respect even though they are probably thinking jerk . You sure have made mess of your life. but they have been taught to smile smile smile. this...

Scott W O'Neill

August 01

Thanks for all your help and negotiations.

Thanks for the update! I have faith in you guys and will continue my payments. Thanks for all your help and negotiations.

Cassandra Robinson

July 30

That A Settlement Was Entered.

I Absolutely Love You All At United Settlements. You All Have Saved My Credit Solutions. I Would Refer Everyone To You Services.

Mildred Yvonne Sherron

July 16

The results of the settlement attempts.

So far, I have found United Settlement more than satisfactory. Very conscientious and very efficient in providing a service in debt settlement. Thank you and all the members of your team who are assisting...

Diana Cardona

July 16

Tough Financial Hard Times During Covid-19

I signed up with United Debt Settlement because of large credit card debts, which had taken a financial toll on my credit. UDS has an outstanding reputation assisting clients like me achieve financial recovery...

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
  • 240 West 37th Street
    Suite 400
    New York, NY 10018
  • (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
  • Careers
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 25% including fees, over 24 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. NMLS ID: 1947026
    Copyright 2023. United Debt Settlement, LLC