Does Canceling a Credit Card Hurt Your Credit?

Nearly everybody on this planet knows that Dave Ramsey is against credit cards; so much so that he shuns the idea of utilizing cards for their rewards and encourages people to CANCEL all of their cards despite the fact that canceling it may hurt your credit.

Cutting up your credit card

So, being a Dave Ramsey-trained counselor and coaching people over the last few years, a question I commonly get asked is: does canceling a credit card hurt your credit?

While there are variables that may change the answer, a majority of the time canceling a credit card will hurt your credit.

The 2 Main Ways Canceling a Credit Card WILL Hurt Your Credit

1. It affects your credit history.

A large part of your FICO score involves the length of your credit history: basically how long you’ve had credit cards, mortgages, and other loans open.

If you are thinking about canceling a credit card it would be wise to cancel one that you’ve recently opened. If you cancel an older credit card then it will likely hurt your credit.

2. It may affect debt-to-credit ratio

The other primary way that canceling a credit card will hurt your credit, is that it will change your debt-to-credit ratio.

For those that don’t understand this, let’s assume you have 3 credit cards with a total available credit limit of $10,000. If two of those cards have balances of $6,000 (one is paid off), then your debt-to-credit ratio is 60% or $6,000/$10,000.

Now, if you were to cancel the credit card that had a $0 balance and keep the other two cards open, it would change that ratio (for the worse) and hurt your credit. For this example’s sake, let’s say the card you were going to cancel had a $2,000 credit limit. Once you cancel the credit card your debt-to-credit ratio would then be 75% with $6,000 of debt to $8,000 in available credit.

While nobody knows the exact percentages, part of your FICO score does include the debt-to-credit ratio and having anything above a 25-30% is said to hurt your credit.

So, should you cancel your credit card anyway?

If you’re part of the Dave Ramsey cult and truly believe that your credit score doesn’t matter, then sure…you might as well cancel it.

However, if you’re looking to obtain a high credit score and build your credit so that you may get a mortgage down the road, refinance your house, or get better rates on your utility, cell phone, and insurance bills, then NO! You should not cancel a credit card because it will likely hurt your credit.

Saying all of that, if you’re one of the credit card holders that are working the system and pay your balance off every single month, then canceling a credit card may not not hurt your credit. Caveat: as long as you cancel the card with the least amount of credit history. The reason your credit score would remain unaffected in this scenario is because you already have a debt-to-credit ratio of 0%. So lessening your available credit would not change that ratio.

If you’re ignorant about your credit score and haven’t looked at your credit report in years, then take a few minutes and take advantage of a few resources that will help you obtain a free credit score and report.

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About the Author

By , on Jul 27, 2012
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of

How to Become Rich e-Course

Budgeting 101


  1. There was a point where I really couldn’t trust myself to keep a credit card handy when it had a $0 balance, but now that I have been responsible for over a year, I have no plan on cancelling any of my cards once they are paid off…btw, I am paying off one credit card (of two) in full tonight! Update post coming in a day or two…

    • Andy says:

      Congrats ADP! It is so fun to eliminate a debt! It’s been AWHILE since we’ve completely knocked out a student loan and I can’t wait to see another one disappear!

  2. A Blinkin says:

    Good summary here. I typically tell people that if there is an annual fee and you’re not using the card – you should probably cancel it. If it’s not costing you anything, then why not keep it open?

  3. Thanks for posting this! I’ve always thought similarly – just cut it up and dont us it and have the empty card on your credit report. I’m not really savvy with the credit card points (probably because I don’t spend enough on it) but some people swear by it, as you know!

    Glad I stumbled on your blog and am looking forward to many more great posts like this one!
    Budget Blonde

  4. Pennyforyourthoughts says:

    This is so backwards. People should not be penalized by making responsible financial decisions like consolidating credit cards into a few that can be properly managed and monitored with credit amounts that prevent people from overspending. We’ve all been there signing up for credit cards on university or college campus to get the free t-shirt/bag/swag, but more importantly to feel more like an adult with our very own credit card. Most of them had no benefits and extremely high interest rates. And now we have to carry them with us forever just because they are the oldest ones so that our credit history isn’t impacted? That is nuts.

    Your credit history should be that – a record of how you’ve managed your credit over the years. I don’t know why your “rap sheet” should disappear just because you cancel the card (and close the account), especially with the technology and storage capabilities we have today. It is irresponsible for people to be forced to keep credit accounts open and stock pile credit which often leads to the temptation of “buy now, pay later” mentatlity (cuz you have soooo much credit!!) or worse case, leaving many to be susceptible to fraud or identity theft because they aren’t able to monitor all these accounts.

  5. The best approach here is to never carry CC more than you need, cancelling problem solved 🙂

  6. THANK YOU! THis whole credit card and credit score thing is so confusing to me. My wife and I are out of CC debt and we rarely use our cards, but we haven’t cancelled anything because I’m scared of what it’ll do to our credit score! Very confusing. THanks for clearing some of this up!

  7. I keep my Amex open primarily because I’ve had it for 10 years.

  8. Andy Hough says:

    I do have one credit card that I never use but haven’t bothered canceling. I’m not really worried about canceling it affecting my credit score since I don’t plan on applying for a loan anytime soon. And since it is one of my newer cards it probably wouldn’t affect my score much anyway.

  9. Modest Money says:

    Thanks for covering this topic Andy. I had been wondering about this. I had just applied for another credit card, but then later realized that there is an even better option. So there is a good chance I will cancel this on to get that other card instead. I was worried about it somehow hurting my credit, but I guess it won’t. I do always keep my balance clear.

    • There are other ways it does hurt your credit though. For example, the hard check when you applied and it will show up that you canceled it right after opening. This usually leads lenders to assume you’re opening and closing or transfering balances because you can’t pay it off.

      I keep creditcards purely for my credit score. My credit to debt ratio, credit history, etc…all help at some point with loans, mortgages, better credit cards for rewards, etc…. The second reason I like CC’s are for the rewards. I love cashback!

  10. I tend to think that, for those who have a history of handling credit cards responsibly, nothing wrong with maintaining a little used account purely to avoid hurting your credit score. The higher your score, the more money you save, after all, on all sorts of things, and a score can matter in eligibility for certain jobs or to be approved as a tenant. But for those who, for whatever reason, have a history of living beyond their means through credit cards, my thought is their score will ultimately and inevitably be lower if they do not cancel little used credit card accounts. Unused credit is sort of a disaster waiting to happen for these unfortunate folks.

    All that said, no matter your tendencies, there remains just one sure way of avoiding excessive credit card debt: Don’t have any credit cards!

  11. Joe Morgan says:

    I prefer to simply put the cards in a safe place (NOT my wallet) and use then about once every 6 months for small purchases and pay it off immediately. That keeps the credit line alive, keeps my history good but keeps my spending (and interest) down. 🙂

  12. Great analysis and I think you hit it dead on. I personally wouldn’t cancel my cards but that doesn’t mean you have to have the physical card. You can cut it up and your account will still remain open according to the credit card company. They wont know that you cut it up!

  13. So, does this apply to all types of credit cards equally?

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