What Really Happens When You Close A Credit Card

Advice on closing credit cards varies. The nuance matters, because closing the wrong card can drop a score by fifty points or more.



Closing a card removes its credit limit from your total available credit. If you owe money on other cards, your utilization ratio jumps overnight.



Closing a card also shortens the average age of your accounts, especially if the closed card was old.



Anyone wanting the step-by-step version can find it in credit utilization|payment history|credit bureaus|credit limit|debt to income ratio|hard inquiries.



On the other hand, keeping unused cards open has small downsides. Some cards have annual fees. Managing many cards adds mental overhead.



The usual right answer is: keep any card with no annual fee open indefinitely. Cards with annual fees deserve a judgment call every year.



The worst move is closing an old high-limit card while carrying balances on other cards. That single decision can drop a score by more than any positive habit will build in six months.