What to know before closing a credit card with a balance

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Published on November 25, 2024 | 4 min read

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Key takeaways

If you close a credit card with a balance, you’ll still be responsible for that debt.
Card issuers will continue to send statements in the mail, and interest will still be applied to that balance.
In general, it’s best to leave your account open and simply avoid using it if you want to avoid negative impacts on your credit score while paying it off.

While you can close a credit card with a balance, there are plenty of details to keep in mind before you do so. For starters, you need to have a plan to pay your remaining debt off before you close a card, and you should really have a reason to close the card versus just keeping it open until the balance is paid off (and potentially even after).

Closing a credit card with a balance can also hurt your credit score — even though you’re not adding more debt. Read on to learn everything that can happen when you close a credit card while still owing money, plus some pros and cons that come with making this move.

What happens if you close a credit card with a balance

When you close a credit card and you still owe a balance, the debt you owe doesn’t go away. The card agreement still applies, and you are still legally responsible for repayment. The following will also go on as normal:

You’ll continue receiving credit card statements in the mail. You’ll get the typical credit card statement in the mail every month as long as you owe a balance, and you’ll still owe at least the minimum payment required on your credit card each month.
Your credit card balance accrues interest as usual. Your credit card balance will continue accruing interest (including residual interest) until your balance has been paid in full. Since credit card interest rates are typically variable, your rate can also change over time. Issuers don’t need to notify you in advance if they raise your interest rate as a result of changes in the Federal Reserve’s target interest rate. However, your credit card company is generally legally required to send you a notice 45 days before it can increase your interest rate.

That said, credit card issuers cannot increase your annual fee or charge you new fees after you close a credit card. Closing a card with a balance can also help you avoid paying the annual fee for a credit card (if the card you’re closing charges one).

How closing a credit card with a balance impacts your credit score

While a credit card account that’s closed in good standing can stay on your credit reports for 10 years and help your credit score as a result, closed accounts with late payments or other negative marks can only stay on your credit reports for up to seven years. This factor may not impact your decision at all, but it’s worth knowing how long a closed account can impact your credit score either way.

Generally speaking, you should not close a credit card with a balance — or any credit card you’re not really using — if you want to keep your credit in good shape. This is because closing your card will impact these two major factors of your credit score:

Credit history: Since the average length of your credit history makes up 15 percent of your FICO score, closing accounts can hurt your credit score in the short term and even over time if you don’t have other accounts on your reports with a lengthy history.
Credit utilization: Closing a credit card account can also impact your credit utilization ratio, or the amount of debt you have relative to the total amount of credit available to you. This factor makes up 30 percent of your FICO score, so the impact of closing a card can be significant if you have a lot of debt since you will be using more of your available credit.

Pros and cons of closing a credit card with a balance

Your personal financial situation will ultimately decide the best move for you, and that could be closing a credit card regardless of the potential impacts on your credit score. For instance, if you keep using a credit card to get into financial trouble and you’re desperate to break the cycle, closing a card with a balance may be the best step.

Before you move forward, consider the potential advantages and disadvantages of closing a credit card with a balance:

Pros

You’d avoid paying an annual fee. Closing a credit card can help you avoid paying an upcoming annual fee, which you may not want to pay if you’re no longer getting enough value out of the card.
You can end the temptation to spend. Closing a card makes it impossible to rack up new credit card balances on that particular card.
You can simplify your financial life. Closing a credit card can make your financial life simpler since you’ll no longer have the option to use that card, and you won’t have to make monthly payments toward it.

Cons

You can damage your credit score. Closing a card can reduce the length of your credit history and increase your credit utilization, both of which can hurt your credit.
You’d lose out on cardholder benefits. Closing a card means you no longer have access to perks you had before, which could include consumer protections, complimentary insurance or travel benefits.
You’d limit your credit options for emergencies. Keeping a card open means you have access to a line of credit for emergencies, whereas closing it means you cannot use it if you need it.

Should you close a credit card with a balance?

If you can avoid closing a credit card, or if you don’t really need to close a card, you’re almost always better off leaving your account open. This is especially true if you’re trying to improve your credit score or at least not hurt it, and if you have a rewards balance you haven’t yet used. Additionally, you can consider keeping your card open as an emergency line of credit, even if you have no real plan to use it.

Also, remember that there are alternatives to closing a credit card with a balance. For example, if you’re tired of paying your card’s annual fee, you can call your card issuer to ask about downgrading to another card option that doesn’t charge one. Or, if you have debt you want to consolidate and pay down, you can transfer your balance to a balance transfer credit card that offers a 0 percent intro APR for a limited time.

The bottom line

While you technically can close a credit card with a balance, that doesn’t mean you should. Ideally, you’ll keep your card open while you pay off your debt to avoid an impact on your credit score, as well as to have access to this line of credit for emergencies.

That said, you may decide to close a card just because you feel it’s right for you. Only you know what you can handle. If closing a credit card account will leave you better off, you should feel confident in your decision and move forward with closing the card.