Do I need to pay other card balances before closing my credit card?

Ask Miles: Do I need to pay other card balances before closing my credit card?

Do I need to pay other card balances before closing my credit card?


Answer

You can pay and close down your credit card account anytime you want. Thankfully there is no such thing as a cancellation/exit fee. That’s the same for every credit card.

Closing your credit card account could have the unintended effect of lowering your credit score. This is because, when you cancel a credit card, your total available credit limit drops by the amount of the limit on the cancelled card. This means that, if you have any other outstanding balances when you cancel one of your cards, your total credit utilization limit will go up. This could affect your credit rating adversely.

Getting rid of a credit card doesn't always have an impact on your credit score.

Getting rid of a credit card doesn't always have an impact on your credit score. For example, if you've just got a new credit card and then closed the old one (or vice versa), it may not change your overall score.

It's also important to keep in mind that your credit score can fluctuate as more details are added to your credit file. So even if cancelling a credit card does affect your credit score in the short term, how you manage your accounts over time will play a greater role when it comes to getting approved for the cards and loans you want in the future.

When applying for a card, remember to always check the eligibility criteria. 

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Disclaimer

The products, banks and companies mentioned in this Ask Miles question and answer were correct at the time of publishing. The information published is general advice only and should not be taken as specific personal finance advice.

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