When Should You Cancel Your Credit Card?

If you sign up for credit cards in order to get the sign up bonus, you’ll likely hold on to a card for about a year and then call to cancel the card.  Ultimately, the question is: when should you pull the trigger on the cancellation?

No Annual Fee Credit Card Cancellation

If the card is a no annual fee card and there is no apparent reason to cancel the card, then you might just be sure you have good records in place and keep the plastic in a safe place.  The only exception might be companies that only allow you to have a limited number of accounts (Chase is rumored to only allow you to have two personal cards).  Thus, if you were going to open a new account you would want to close an old account first.

If you have many open accounts, it does increase the possibility of identity theft.  You might consider an identity theft watch program.

However, for annual fee credit cards, that is not really possible.

Annual Fee Credit Card Cancellation

I believe the best time to cancel your is the month or so before the annual fee is about to be assessed.

Reasons to cancel your card around 11 months after signing up:

  1. You’ll have an opportunity to make one last spend in order to keep your miles active.  Remember, most airlines have around an 18 month activity requirement.  If you don’t earn any points in that time period, they may remove the points from your account.  Thus, somewhere around the 10 month mark after sign up, you should make a purchase to post activity on your account.
  2. You’ll avoid the annual fee.  My understanding is that you can typically call after they assess your annual fee (within 30 days) to get your card cancelled and annual fee returned.  However, for me that just seems like playing with snakes.
  3. You’ll have better upgrade, alternative card, or bonus miles offers.  The more you use a card and the more you spend, the more likely it is that the credit card company will say, “What if we wave the annual fee?” or “What if we give you 10,000 bonus points?”  However, if you made one purchase in 11 months, I wouldn’t expect them to go head over heels to keep you on board as a customer.
  4. Reduces the impact on your credit score. 15% of your credit score is built on the length of your credit history.  This is impacted by the average length you have a credit card.  The longer you can keep the card open (11 months vs 3 months), the better.

Considerations when canceling:

  1. Canceling may impact your credit utilization.  If you have two cards with a total $10,000 credit limit and you have a total balance of $3,000, then you are using 30% of your allowed credit.  However, if you cancel a card that has a $5,000 allowance, then your $3,000 means you’re carrying a balance of 60% of your credit score.
  2. If you are going to be buying something that requires credit (car or a house), then you’ll want to do your best to avoid signing up for credit cards within the year before you get your loan.  Also, you should avoid cancelling any credit cards.  It’s best to wait and do those things after you’ve obtained your loan.  Remember, your credit score is important as it impacts your loan rates, your insurance rates, and even your ability to get more bonus points on credit cards.
  3. Take a look at your credit report (you get three free annually – one from each credit bureau) to be sure the card has been closed.

You can track your credit for free with Credit Karma.

If you still have more questions, you can read about the impact of canceling a credit card.

By the way, any time you sign up for a credit card, you should put a reminder in your calendar to be sure you cancel the card before the annual fee is assessed.


  1. says

    Or, you can do what I did and just cancel your credit card when the card company does something irrational and infuriating and you just don’t feel like doing business with them anymore. Of course, that wasn’t a card that had any kind of reward or bonuses aside from a hefty interest rate.

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