Closing a credit card removes that card's credit limit from your total available credit. If you carry balances on other cards, your overall utilization ratio jumps immediately — and utilization is the second-biggest factor in your score after payment history.
The two ways closing a card can cost you
First, the utilization effect described above, which can happen the very next billing cycle. Second, a longer-term effect on your average account age once the closed account eventually drops off your report (closed accounts in good standing can stay for up to 10 years, but their impact on average age fades gradually).
If you must close a card, pay down other balances first
Lowering your balances on remaining cards before closing an account can offset most of the utilization spike. Closing a card with a $0 balance while your others are also near $0 has minimal impact.
When closing a card is still the right call
- The annual fee outweighs the benefits you actually use.
- You're worried about overspending temptation more than a temporary score dip.
- It's a store card you'll never use again and the issuer won't waive the fee.
