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When To Cancel a Credit Card: How to Maintain Credit History

Posted: May 12,2020
by Jameson Lamie
Last updated: August 29,2020

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When should you cancel a credit card?

Maybe you want to cancel a credit card because it doesn’t suit your needs anymore.

One thing you need to keep in mind is that anytime you cancel a card, it’s going to negatively affect your credit score. A big factors that’s taken into consideration with your credit score is the length of account history.

For example, if I got my first credit card 5 years ago, my length of account history is 5 years.

But let’s say I have my 5 year old card, and I get another one 2 years later. You take an average of those 2 numbers and that’s the new length of the account.

So in this scenario you have 3.5 years of credit account history.

However, let’s say you decide to get rid of the 5 year old card.

Even after you’ve built up those 5 years of history and payments they will be erased. In this example, the next newest account you have is the 2 year old card that has none of the 5 years history.

Try to get cards that are useful over a long period of time – and not cards you plan on canceling.

Types of cards I like:

  • Credit Cards with no annual fee.
  • Cards that have an annual fee that pays for itself.
  • Cards that are really valuable in terms of earning.

Let’s say you’re at the point where you want to get rid of the card. What do you do?

First things…

  • Get on the phone with the credit card company and tell them you want to cancel. Anytime a company hears this they’ll send you to their retention line. The primary focus of the retention team is to try and keep you as a customer.

Ideal scenario:

  • You: “I’m really thinking about cancelling my Southwest card”
  • Reconciliation/ Customer Retention Agent: “We’ll give you another 5,000 bonus points if you keep the card for another year.”

When is it a good time to cancel credit card? Change it to a no annual fee card.

When is it a good time to cancel credit card? Change it to a no annual fee card.

Downgrade before canceling

Before cancelling the card entirely, you may just want to downgrade the card. This is nice because you won’t lose your account history. Downgrading usually allows you to keep the account history.

Example: You have the Delta Gold Skymiles card with a $95 annual fee and don’t want it any longer. Before you cancel, you can call American Express and ask them to downgrade the card. Downgrading to a lower or no-fee version of that exact same card will allow to keep your history.

If you really want to cancel your credit card.

Maybe you just got the card so you can get a signup bonus. That’s totally fine and I’ve done that. But just make sure you cancel sooner rather than later so you’re not building out history. Your credit score is going to drop, just by a few points. After 3-4 months the history should be back at the level before you cancelled the card.

It’s not a huge deal to cancel a credit card. But it is something you want to minimize and do as infrequently as possible.

Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

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