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How to cancel a credit card

There are a number of reasons you might want to cancel a credit card. Find out how to go about closing your account and what to watch out for

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How to cancel a credit card - woman cutting up a credit card
It's not just a case of cutting yur plastic in two - find out the correct way to cancel a UK credit card.

If you have an unused credit card lying around at home, you might be considering cancelling it. Cancelling an unused credit card has several benefits, not least because it can prevent you from spending on it again and building up debt.

The process isn’t as straightforward as you might expect, however, and in some cases it can work to your advantage to keep your credit card account open - as we explain.  

Reasons for cancelling a credit card

There are many reasons why you might want to cancel a credit card. These can include:

  • You want to reduce the number of cards in your wallet

  • You no longer want to pay an annual fee on your credit card

  • Your card’s 0% purchase or balance transfer deal has come to an end, and you’ve cleared the balance

  • You’ve transferred your existing credit card balance to another card with a lower interest rate

  • You no longer have any use for the rewards offered by your credit card

  • You want to reduce the number of accounts you have open, either for simplicity or to reduce the risk of fraud

What are the benefits of cancelling a credit card? 

One of the most obvious benefits of cancelling an unused credit card is that it lowers the temptation to spend on it again. It can also make it a lot easier to manage those credit cards that are still active.  

Additionally, closing down a credit card account can reduce the risk of fraud. If you rarely check your credit card account because you never use it, you may not notice any fraudulent transactions.

It also lowers your “total available credit” on your credit score, which some lenders look at before making a decision to offer you a new product. 

Deciding to cancel your card can also prompt your provider to offer you a better deal, such as a more competitive interest rate or new rewards. 

Is cancelling a credit card always a good idea?

Despite the above benefits, cancelling your credit card won’t always be the right move. Although many believe that closing down unused credit card accounts can boost their credit score, there’s also an argument to suggest it will do the opposite. 

This is because when deciding whether to let you borrow, lenders take into account something known as the “credit utilisation rate”. This is the portion of credit you’re using out of the credit limit available to you. For example, if you had an overall credit limit of £3,000 and you were using £1,500 of it, your credit utilisation would be 50%. 

This is done on a “per account” basis - so an unused and paid off card that score is exactly 0%. Used the right way, that unused account could mean you get two scores of 25% rather than one of 50%, which some see as beneficial. 

What to watch out for when cancelling a credit card

Before deciding whether to cancel a credit card, it’s a good idea to do the following:  

  • Check your credit record using an online fee-free service. This will enable you to see how long you’ve held each of your credit cards. It’s important because the length of time you’ve held an account will be considered by the three credit reference agencies (Experian, TransUnion and Equifax) when calculating your credit score. If you’ve held a credit account for several years, this suggests the lender has trusted you for a long period of time. If you cancel a long-held account, the average age of your accounts will be reduced which could have a negative impact on your credit score – particularly if your credit score is already less-than-perfect.

  • Calculate your credit utilisation ratio. If you have more than one credit card, it’s usually a good idea to spread your spending across them so that you don’t exceed 70% of your credit limit on any one of them. 

Finally, it’s better to use an existing account in times of need than to apply for a new one – in terms of credit scores.  

So think carefully about the impact on your credit report before cancelling a credit card – especially if there’s a chance you’ll need to apply for another form of credit such as a loan or mortgage in the near future. 

How can I cancel my credit card?

If you decide to go ahead and cancel your credit card, you’ll need to do more than simply cut up your card with a pair of scissors. To cancel your card correctly, follow the steps below:

  • Pay off your balance: this is a crucial first step as you won’t be able to cancel your card otherwise. Make sure your balance has been repaid or that you’ve moved it to a balance transfer credit card

  • Contact your provider: you can either phone your card issuer to inform them or put your request in writing. Your provider’s phone number should be on the back of your card. 

  • Consider any new deal you’re offered: but only take it if it’s worth it. If not, stand firm and close the account. 

  • Double check your final statement: it may take a few days for the cancellation to go through so check your statement is completely up to date.   

  • Cut up your card: once the cancellation is complete, cut up the card through the name and number and throw it away.

Could my provider cancel my credit card automatically? 

In most cases, you will need to inform your provider if you want to close your account. Your card won’t be cancelled if you simply stop using it.    

However, if your credit card is inactive for a long period of time, some card providers will contact you to say they are going to close the account unless you tell them otherwise. 

Your card provider may also choose to suspend your account if you’ve been in persistent debt for at least 36 months. 

Can I cancel a credit card to take advantage of a new offer? 

If you cancel your credit card, you might be considering applying for another card with the same provider so that you can take advantage of new customer offers. 

However, bear in mind that some card providers will exclude you from new customer offers for anywhere between one month and 24 months. Usually the providers that offer the most competitive deals will be the ones that make you wait longer, so be sure to check.

What should I do if my card is lost or stolen?

You don’t necessarily have to cancel your credit card if you misplace it. Most card issuers now allow you to deactivate or temporarily “freeze” your card through online banking or via your provider’s app. You can then reactivate your card once you’ve found it.

However, if you’ve permanently lost your card or it has been stolen, you’ll need to phone your provider as soon as possible. Your provider will then cancel the card and send out a replacement within 10 working days.

If your card is used fraudulently before it is cancelled, your provider should refund you in full for these transactions, unless it can prove the transactions were due to gross negligence on your part. If you consider this unfair, you can complain to your provider and take it to the Financial Ombudsman Service.

Frequently asked questions

How many credit cards is too many?

There are no official rules on the number of credit cards you can have. After all, different cards can be used for different purposes. However, if you have several credit cards in your wallet, it can be much harder to keep track of your spending and it can increase the risk of fraudulent use. If you’re struggling to manage all of your cards, it might make sense to close one or two of them.

What happens if I cancel a credit card and a purchase is refunded?

You are still entitled to get your money back even if your card has been cancelled. In this situation, your card issuer must contact you to arrange the refund. 

How can I improve my credit score?

There are a number of steps you can take to improve your credit rating, such as checking you’re on the electoral roll, paying bills on time, correcting any errors on your credit report and spacing out credit applications by three to six months.

About Rachel Wait

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