Here's how to cancel your credit card

Often, closing a credit card just makes sense, like if your card charges a steep annual fee and you just aren’t using it. But, like all things credit, it requires following a set process and may bring out some potential headaches you need to consider.

What happens when you close your credit card account?

Cancelling a credit card may help you save money, but the process can actually hurt your credit score if you aren't careful. Here’s how:

• It raises your credit utilization: When you close a card account, you are reducing the overall amount of credit you have access to. So, the balances owed on other cards will cause your credit utilization rate to climb—and a higher utilization (especially above 30%) typically lowers your score.
• It could shorten the length of your credit history: The average age of your revolving credit accounts is one of the factors on your credit score, so closing an old account can significantly reduce that average age.
• It reduces your credit mix: Lenders like borrowers with a track record across different types of credit (credit cards, mortgages, other loans), as it is an indicator of a savvy, experienced borrower. Closing a card account can harm a healthy credit mix, but the impact is typically minimal.

Fortunately, the impact of these negative factors depends on your overall credit health and diminishes fairly quickly—if there was any impact at all.

When should you cancel your credit card?

While closing a credit card account can cause an initial credit score drop, there are instances when doing so makes sense. As mentioned, if you aren’t getting enough value to offset a card’s annual fee, it makes more sense to cancel your account and save the money.

Other examples of when it makes sense to cancel your card include:

• Joint account closure (as in divorce)
• The card’s rewards no longer fit your lifestyle
• The issuer changes the card’s terms or rewards unfavorably
• You have debt spread across a few different cards and are rolling it into a balance transfer card or other form of debt consolidation.

When shouldn’t you cancel your credit card?

But cancelling your credit card can sometimes cause more harm than good. If your credit card charges no annual fee, for example, there’s little downside to keeping the card open, as it helps with your average credit history and credit utilization.

Just don’t keep a card account open just for the sake of it.

Here’s when you should not cancel your account:

• It’s one of your oldest accounts, so closing the account shortens your average credit history length and more dramatically impacts your credit score
• Its high limit keeps your credit utilization low
• You’re planning to apply for another major loan, such as a mortgage or auto loan, because keeping the account open helps maintain a stable credit profile.

How to cancel your credit card

The easiest way to cancel your credit card is to call your bank’s customer service or, if that's not available, to cancel your card in writing.

But before you cancel, here’s what you need to do first:

• Pay off or transfer the outstanding balance. Most issuers require you to have a zero balance to cancel the card. And while some issuers let you close an account with a balance, you still need to pay it off in full (and remember that interest continues to accrue until paid in full).
• Redeem or transfer any reward points to avoid losing them.
• Transfer or cancel pre-authorized payments to avoid missed payments or penalties.

Steps for cancelling credit cards with leading Canadian banks

Here’s how to cancel a credit card with Canada’s biggest lenders:

• American Express
  • Amex requires cardholders to call customer service at 1-888-461-2639. You will likely be routed to the retention team, which may waive or reduce the annual fee or offer a spending bonus. If you choose to cancel, decline the offer, and request that the account be closed.
• BMO
  • BMO allows cardholders to cancel their cards via secure message in the BMO mobile app. Log on, send a Message, specify the card (card type and last four digits), and confirm the cancellation request. Additionally, you can call customer support at 1-877-262-5907.
• CIBC
  • CIBC only allows you to cancel your card by phone. You can contact CIBC customer service at 1‑800‑465‑4653 or request a call back through the CIBC virtual assistant.
• MBNA
  • MBNA also requires cardholders to contact customer service to close a card. You can contact MBNA at 1‑888‑876‑6262 and request cancellation.
• RBC
  • Like BMO, RBC allows cardholders to cancel their cards via online banking and its mobile app. Simply log on, locate the Help Centre chat bubble, and request your account closure. A live agent will help you from there.  Additionally, you can call customer support at 1‑800‑769‑2512.
• Scotiabank
  • Scotiabank only allows account closures by phone at 1‑866‑267‑4935.
• TD Canada Trust
  • TD allows cardholders to cancel a card through mobile banking. You can also call TD customer service reps at 1‑800‑983‑8472 to cancel your TD credit card.

Check your statement for confirmation and monitor your credit for impact

If you cancel the card over the phone, record the date, time, and the representative’s name. If you send a written cancellation request, include your credit card and account numbers, and clearly state that you want the account closed. In either case, ask for written confirmation that the account has been closed.

If you don’t receive written confirmation of the cancellation, follow up with your credit card issuer promptly. Once you have confirmation, destroy the card. It can take up to 30 days for the changes to appear on your credit report.