You’ve paid your remaining credit card balance. Now it’s time for the ceremonial snipping that will keep you from ever using the card again. It’s a satisfying gesture, especially if you’ve found it hard to use a credit card responsibly. But closing a credit card may impact your credit score. Your credit score is based on several factors. And closing a credit card account can have an impact — so it’s important weigh the pros and cons first.

Why Close an Account?

Although closing a credit card account may hurt your credit score, there are cases where it might make sense. For example, if you can’t avoid the temptation of using a credit card to live well beyond your means, closing your card could be the most responsible move. It may also make sense if your card’s terms are no longer favorable and costing you too much money in the long run. And while having less available credit may not help your score, neither does the inability to make payments on time. But if you can, avoid closing an account unless you feel it’s absolutely necessary.

Which Accounts Do I Close?

If you must close an account, consider avoiding closing your oldest ones. The longer an account has been open, the better it is for your credit score. This is especially true if you’re younger and have a less substantial credit history. Closing an account early in your credit history may indicate risk and negatively affect your credit score. Instead, consider canceling cards with high interest rates or annual fees.

Why is My Utilization Ratio Important?

You might want to consider that closing a credit card account has the potential to negatively affect your “utilization ratio.” It’s usually a factor that determines your credit score. And it’s based on the amount of credit you’ve used versus the amount you have available. Having more credit available and less credit used is ideal and usually beneficial to your credit score. When you close credit cards, you will end up with less credit available.

How to Cancel a Credit Card

If you’ve decided that canceling a credit card is your best option, you need to be thorough and deliberate. After paying your balance in full, get specific account closing instructions from the cards’ customer service department. The operators will likely try to persuade you to keep your account open. Be polite, but firm. And, confirm with the operator that your account will indeed be closed. Then verify the account was actually closed through email and another call.

The bottom line is that closing a credit card account could hurt your credit score. The key is balancing responsible credit management and the desire to maintain or improve your credit score. Understanding your specific credit situation, including your spending habits, utilization ratio and low risk cancellations can help you make the right decision.

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