Closing a Credit Card With Zero Balance

There are plenty of reasons to move on from a credit card that has a zero balance. Maybe your credit card’s features no longer meet your needs or you’ve just finally paid off a card after months of hard work, for example. But closing your credit card account isn’t always the wisest choice, because it might negatively affect your credit score.

We’ll discuss when you may want to close a credit card with a zero balance, how to close your card, and some alternatives that might better serve your financial needs.

Decide if you should close a credit card with a zero balance

If you no longer want to use a credit card after you’ve repaid the balance, you may not want to rush to close it. Closing a credit card account with a zero balance might hurt your credit score by increasing your credit utilization ratio or decreasing the average age of your accounts. But that doesn’t mean there’s never a good reason to close your credit card. Consider the following scenarios:

You want to reduce your spending

If you’ve recently paid off credit card debt, you may want to avoid using your credit card to prevent overspending. Some strategies for limiting access to your card without closing the account include storing your card somewhere that’s difficult to access (like a safe with a combination held by a trusted loved one) or cutting your card up.

By making it hard to reach for your card, you may still benefit from perks like rewards and positive impacts on your credit score without as much risk of spending. If you choose this option, remove your card information from any virtual wallets.

Of course, keeping the account open may still pose too much temptation. In that case, there’s nothing wrong with closing your account to protect your financial well-being, even if your score dips a few points.

You don’t want to pay the annual fee

While some perks may seem great in theory, they’re not always worth a high fee.

You’re carrying a balance on another credit card

If you have high balances on multiple cards, you might consider closing your account with a zero balance to focus on paying off your other debts. However, this isn’t always the best move.

Your credit utilization ratio, the total portion of your available credit in use at a given time, accounts for about 30% of your FICO^® Score.¹ When you close a credit card account, your total available credit shrinks. If you’re carrying a balance, reducing your total available credit increases your credit utilization, which may hurt your score.

You need to dissolve a joint account

Sharing a credit card account with someone you no longer want to share an account with may be a recipe for disaster. If you have a joint account with an ex-partner or family member and no longer wish to be liable for their credit card activity, it’s often best to cancel the account.

You want a higher credit limit

Maybe you like your card, but you just need a little more wiggle room when it comes to your spending limit. In that case, you might not want to close your account right away. Instead, try requesting a higher credit limit from your credit card issuer.

If your income has increased, you’ve paid down debts, or you’ve managed your card responsibly for a while, you may qualify for a higher limit. Keep in mind that your credit card company may conduct a hard credit check, which might knock your score down a couple of points.

You plan on applying for a new credit card

If your credit card no longer meets your needs for any reason—maybe you want to earn more rewards or need a card without a foreign transaction fee—you might want to trade it for a better fit. You may want to wait until you’ve received your new credit card before closing your old account. By waiting, you can delay any reduction in your credit score from closing the card that might hurt your eligibility for a new card.