I Need to Cancel a Credit Card – Should I Apply for Another Before or Wait Until After?

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Million Mile Secrets Reader, HP, tweeted:

If I need to close an AMEX card because of the annual fee, should I open a new card before or afterward so my credit isn’t affected?

Thanks for the question, HP!

Before you cancel a card, make sure you read my post about losing your miles & points when closing an account!

If you’re planning to cancel a personal credit card and sign up for another, it’s best to apply BEFORE the cancellation.  Because cancelling a personal credit card can lead to a negative impact on your credit score.

I Need To Cancel A Credit Card Should I Apply For Another Before Or Wait Until After

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Maintaining a high credit score is the key to getting Big Travel with Small Money.  Your credit score is how banks determine your trustworthiness as a customer, and their decision to approve you for credit cards.

According to myFICO, your credit score is influenced by 5 factors:

  • 35% Payment History
  • 30% Amounts Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Types of Credit
I Need To Cancel A Credit Card Should I Apply For Another Before Or Wait Until After

Learning How Your Credit Works Is an Important First Step!

Cancelling a Credit Card

If your credit card’s anniversary is approaching, and you’ve decided the card’s benefits aren’t worth the annual fee, it’s time to cancel!

Cancelling a personal credit card can temporarily lower your credit score.  But cancelling business credit cards from Citi, Chase, and American Express will NOT impact your personal credit score.  Because business credit cards from these banks aren’t usually listed on your personal credit report from the 3 major credit bureaus.

Cancelling a personal credit card can affect the “Amounts Owed” portion of your credit score.  That’s because creditors keep tabs on how much of your available credit you are using.  Every time you cancel a credit card, that ratio will increase (which is bad!).

For example, let’s say you have a total of $30,000 in combined available credit across all your credit cards, and you regularly have a combined balance that totals $4,000.

You are utilizing ~13% of your available credit ($4,000 balance / $30,000 available credit = ~13% utilized credit).

But if you cancel 1 of your cards with a $12,000 credit limit, you now only have $18,000 in available credit.  That means your credit utilization would be ~22%.  ($4,000 balance / $18,000 available credit = 22% utilized credit).

I Need To Cancel A Credit Card Should I Apply For Another Before Or Wait Until After

Keeping Your Credit Score High Is Key to Big Travel

Note:   Credit cards usually remain on your credit report 10 years after you close them, as long as there is no negative information associated with the accounts.  So cancelling a credit card will NOT immediately impact your average Length of Credit History! 

How to Prevent a Credit Score Decrease

To keep your credit score from dipping, you must keep your “Amounts Owed” ratio from increasing.

Apply for a New Credit Card BEFORE Cancelling

I like to apply for new cards when I’m cancelling old cards, which will balance the credit limits I’m losing.

Remember, if you are applying for AMEX cards, you can only have 5 American Express credit cards at a time (not including charge cards).  So if you already have 5 AMEX credit cards, you’ll have to cancel one FIRST.

And remember, you can only get each American Express sign-up bonus once per lifetime.

Transfer Credit From One Card to Another

Some folks like to try and transfer the credit from one card to another to prevent their debt-to-credit ratio from decreasing.

For example, if you have 2 Chase credit cards, each with a $5,000 credit limit, and you want to cancel 1, you can ask to cancel your credit card and combine your available credit to the other card, giving you 1 card with a $10,000 credit limit.

Note:  Combining your Chase credit lines does NOT result in a hard pull on your credit score.  Other banks, like Citi, WILL hard pull your credit.

This way, your credit utilization won’t increase!

Personally, I don’t do this because it’s too time-consuming for me, and not all banks allow you to transfer credit from one card to another.

Bottom Line

Cancelling a personal credit card can lead to a negative impact on your credit score.  It can increase your credit utilization, which accounts for 30% of your credit score!

If you need to cancel a personal credit card, and want sign up for another, it’s best to apply for the new BEFORE you cancel the old.  This will balance out the old credit you’re losing with new credit!

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Editorial Disclaimer: Neither the responses below nor the editorial content on this page are provided or commissioned by the bank advertisers, and have not been reviewed, approved or otherwise endorsed by the bank advertisers. Opinions expressed here are the author’s alone, not those of the bank advertisers. It is not the bank advertisers’ responsibility to ensure all posts and/or questions are answered.

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6 responses to “I Need to Cancel a Credit Card – Should I Apply for Another Before or Wait Until After?

  1. Can I downgrade my Citi prestige to the Citi Costco Visa card?

  2. It’s not too time-consuming with Chase to transfer credit to another card. One phone call and less than 2 mins, the transaction is done. No fuss at all! Good advice on Citi as I did not know they conduct a Hard Pull on your credit.

  3. I know that AmEx rewards are once in a lifetime but what they using to track that? My wife opened a Starwood CC under her name but used my rewards number. I am now interested in opening a Starwood CC in my name. Would I need a different rewards number or would I be fine using my rewards number?

  4. I think you can transfer most of your credit line between Amex cards via the website.

    If you want retention offers or to transfer the credit line, make sure you talk to someone, the automated phone system can just cancel outright.

  5. @Kory” Amex rewarda are one in a life time” true on Starwood indeed, NOT true on GOLD card and Delta .would love to hear your experiences please

  6. @Aaron – I don’t believe so because the Costco card is a co-brand card.

    @Kory – I’m guessing Social Security number. To be safe, you could open a different SPG account and then apply.