Otherwise, you'll need to keep it open until the balance is zero. To cancel your card, your balance must be paid in full. If you do need to cancel a credit card, there's a process you should follow. If you can resist temptation and avoid touching your credit card entirely, you could keep your card open while focusing on other debt, or making slow headway paying off outstanding balances. While your credit will likely take a hit, closing these accounts so you can focus on other debt payments could set you up for long-term success. If you have outstanding debt that you're having a hard time paying down, or are getting on a debt management plan that requires you to cancel your credit card accounts, this may be unavoidable. If you had a joint credit card with a spouse or significant other and are going through a breakup, then closing your credit card could help keep your finances straight and avoid your soon-to-be ex putting unwanted purchases on a joint card. If your balance keeps increasing and incurring interest, canceling your card might be the smartest move to avoid digging yourself into debt. It might make sense to cancel a credit card if there are high fees, such as late payment fees, annual fees, cash advance fees or fees when you go over your credit limit.
If you're running a high balance and are only making the minimum payments on your card, and the amount of interest you're paying on a card is getting substantial, it might make sense to close that card. While it could put a dent in your score, there are a few instances when it might make sense to do so: So is it bad to close a credit card? Not necessarily.
Credit utilization makes up 30% of your credit score, so it's important to keep your utilization low if you want to maintain a solid score. So where should your credit utilization hover? The rule of thumb is to aim to keep it under 30%. That's because it might be a warning signal that you're in financial hot water or are having problems keeping up with your bills, so you're resorting to plastic. The higher your credit utilization, the riskier you seem to creditors and lenders. If you close a card with a $1,500 credit limit and $0 balance, your credit utilization rate would rise to 14% ($500 divided by $3,500). Your credit utilization rate would be 10% ($500 divided by $5,000 equals 0.10 or 10%). For instance, let's say you're carrying a balance of $500 across all cards, and the total limit on all your cards is $5,000. Your credit utilization can be found by dividing the balance on your cards against the total credit limit on all your cards. It can raise your credit utilization ratio
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