Key Takeaways
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You can close a credit card that still has a balance, but you’ll still have to repay your debt.
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Cancelling a credit card with a balance may impact your credit score.
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Alternatives to closing your credit card include balance transfer offers and keeping your card open but inactive.
You can close a credit card without repaying its entire balance first. However, closing a card without paying it off isn’t a solution to a high balance. In fact, it may even cause unexpected harm to your credit score. Read on for a deeper look at what may happen when you close a credit card that has a balance.
Closing a credit card with a balance
It’s possible to close a credit card that still has a balance. However, doing so won’t erase your balance. The Consumer Financial Protection Bureau (CFPB) explains that you remain responsible for outstanding credit card balances even after you’ve closed an account.
That doesn’t mean there’s never a good reason to close an account you haven’t yet paid off. Canceling your account renders your card unusable. If you’re concerned about overspending, you may want to close your card to avoid reaching for it at check-out.
When you close a credit card with an outstanding balance, you should have a plan for repaying what you owe. If you don’t prioritize paying off a closed credit card, your debt may grow. Your credit score could also suffer.
Impacts of closing a credit card with a balance
Closing your credit card account doesn’t void your credit card agreement. You continue receiving statements and bills from your credit card issuer each month until you repay your balance in full.
Other effects may depend on your credit card company. You might want to review your card agreement and make sure you understand the consequences of closing your account regarding your fees and rewards.
You may want to close an unused credit card to replace it with a card that offers perks or rewards. Instead, repaying the card’s balance and keeping it open may actually help you build a positive credit history and qualify for more options.
How it affects your interest
Balances on closed credit card accounts continue to accrue interest at the same rate, so closing a credit card won’t offer relief from a high APR.
How it affects your credit card debt
When you close a credit card that still has a balance, your credit card debt won’t automatically decrease. You’ll still have to pay at least the monthly minimum on your credit card bill. However, to minimize interest and get out of debt sooner, it’s a good idea to pay more than the monthly minimum whenever you can.
The CFPB explains that your monthly minimum payment may increase after you close your account. However, your credit card company can’t require you to pay more than twice your previous minimum payment or the amount you’d have to pay in order to repay your balance in 5 years (whichever amount is higher).
How it affects your credit scores
A closed account in good standing may stay on your credit report for 10 or more years, while a credit report that’s not in good standing may fall off after 7 years, according to Experian. If your closed account has fallen behind on payments, it could do ongoing damage to your score. On the other hand, closing an account in good standing could limit its positive impact on your credit history.
When you close a credit card, your available credit goes down by that card’s credit limit. However, the outstanding balance still counts toward your total debt. That means closing a card without paying it off could drastically increase your credit utilization ratio. High credit utilization compared to your available credit could hurt your credit score.
Sometimes, leaving your account open—but inactive—could be the better option.
You might avoid additional fees by closing a credit card with a balance. Depending on your credit card agreement, your card issuer may continue charging you monthly or annual fees. However, those fees shouldn’t increase after you’ve closed your account.
A card issuer may stop charging annual fees for your closed card since you no longer benefit from card features after closing the account.
How it affects your rewards
The fate of rewards you’ve earned on a closed credit card account depends on your card issuer. You may lose your rewards when you cancel your credit card. Other credit card companies may offer you a limited time to use your remaining rewards before they expire.
How to close a card with a balance
Carrying a balance doesn’t really affect the way you’d close a credit card. After reviewing your card’s terms, you can typically cancel your account by contacting your credit card company. The customer service phone number is often printed on the back of your credit card. You might even be able to request a cancellation online or through your mobile app.
Destroying your canceled card so no one can read your account number is a standard security measure. If you have a metal card, you may be able to mail it to your card issuer.
Other options instead of closing a credit card
While closing a credit card without paying it off first may be the right call in some cases, alternatives may be more advantageous.
The most obvious option is to keep your card open as you repay the balance. If you’re worried you may feel tempted to use your card, you could cut it up or store it somewhere inaccessible, like a locked safe.
You may also consider transferring your balance to a new card that offers your preferred features or rates.
Did you know?
Closing a credit card with a balance won’t help you avoid high interest fees. However, moving your balance to a credit card with a low interest balance transfer offer could save you money. With Discover, most transfers process within 4 days.
If you want to close your card because you can no longer afford your credit card fee, you may be able to contact your credit card company and request a downgrade.
Remember, closing a credit card won’t bring you relief from credit card debt. If you’re struggling to stay on top of your payments, you may want to contact a qualified credit counselor for help.
It’s possible to close a credit card with a balance. But it’s not always the right option. Before taking the leap, it’s important to understand the potential consequences and alternatives. That way, you can make the best choice for your unique needs.
