Should You Cancel Your Balance Transfer Credit Card?

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ByDoug Milnes, CFA
Edited byCasie McCoskey
ByDoug Milnes, CFA
Edited byCasie McCoskey

Updated: April 4, 2024

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If the card you used for a balance transfer isn't useful anymore, you might wonder, "Should I cancel that card?" The answer for most people is that you should keep your card even after you've paid your balance in full or the 0% introductory period ends. Keeping the card open helps your credit score, so even if it's in a drawer collecting dust, it may still be helpful for your finances.

Consider canceling the card if it carries an annual fee, you're having trouble staying disciplined with your spending or the extra credit line is a liability to your debt plans.

KEY TAKEAWAYS
  • Keep the card unless it comes with an annual fee, and you’re not getting any real benefit from it. You can use it for small expenses to prevent it from closing due to inactivity.
  • Canceling a card hurts your credit by increasing your credit utilization and lowering the average length of your credit. Consider canceling only when necessary.
  • Instead of canceling, you can ask your card issuer to upgrade your card for more rewards or downgrade it to a no-annual-fee card. Getting a product change won’t hurt your credit.

Why Keep a Balance Transfer Credit Card

The best balance transfer cards on our list offer no annual fees. If your card doesn't have a yearly fee, it shouldn't cost you anything to maintain. Even if your balance transfer card isn't your everyday spending card or lacks rewards, keeping your balance transfer credit card can also offer the following benefits:

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    Positive impact on credit score

    Maintaining your balance transfer card with a low or zero balance can improve your credit score by having a lower utilization, a longer credit history length and a diverse credit mix.

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    You have a backup for emergencies

    Even if you don't plan to use the card regularly, it can be a financial safety net for unexpected expenses. This way, you can avoid dipping into savings or taking out a loan for emergencies.

If you decide to keep your card, use it to pay for things like gas and minor expenses. Using your card from time to time will prevent your card issuer from closing your account due to inactivity. That will have the same impact as canceling your credit card.

When to Cancel a Balance Transfer Credit Card

While keeping the balance transfer credit card is typically a better option, here’s when you should consider canceling:

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    You pay high annual fees and maintenance costs

    If your balance transfer card has a high annual fee and you're not getting enough value from the card to justify the cost, it's better to cancel it. You can also request a credit card upgrade or downgrade instead of canceling your card.

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    You tend to overspend and need to keep a tight leash

    Having a credit card available, even with a low balance, might tempt you to make unnecessary purchases or incur debt again. If you tend to overspend, consider the implications of keeping the card.

How Canceling a Balance Transfer Card Hurts Credit Scores

Canceling a credit card decreases your total credit availability, potentially increasing your credit utilization ratio, especially if you have outstanding balances on other cards. This can negatively impact your credit score.

This might also affect the diversity of your credit (credit mix) and shorten the average age of your credit accounts (length of credit history), both of which can lower your credit score.

If you have a good credit score and a long credit history, canceling a card will not have as big of an impact on your credit score as it would on people with lower credit scores or shorter credit histories. You can take some steps to reduce the effect of shutting your account.

How to Minimize the Impact of Credit Card Cancelation

To minimize the impact on your credit score, you can apply for a new card before canceling the old one. This approach helps maintain your total available credit. Note, however, that applying for a new card triggers a hard inquiry, which could temporarily lower your score.

Avoid canceling cards when you're about to apply for major loans like mortgages or auto loans. Instead, choose a stable financial period when you're not seeking new credit.

Work on lowering your credit utilization rate before canceling your card. Lower credit utilization across all accounts can help buffer the impact of losing one credit line. It also helps if you're up to date with all your payments, as this improves your credit score, which may offset the negative effect of closing a card.

CAN I CANCEL MY BALANCE TRANSFER CARD IF IT STILL HAS A BALANCE?

You cannot cancel your balance transfer credit card or any other credit card if there is still an outstanding balance. If you have any remaining balance after the introductory time has ended, you can transfer it to another balance transfer card. You may request a credit card cancellation only after transferring the balance and confirming that your current card's balance is zero.

How to Cancel a Balance Transfer Credit Card

If you decide that canceling your balance transfer credit card is the best course of action, follow these steps to ensure a smooth transition:

1
Claim Unused Rewards

If your card has a rewards program, redeem any unused points or cash back before you close the account, as you might lose these rewards upon account closure.

2
Update Automatic Payments

If you used your card to pay for recurring charges, update these with another payment method to avoid missed payments and potential late fees.

3
Settle Your Remaining Balances

Before canceling the card, ensure you've paid off any outstanding balances to avoid accruing additional interest charges.

4
Notify the Issuer

Contact the card issuer and notify them of your decision to close the account.

5
Confirm the Account Closure

Double-check with the issuer to ensure that the account has been successfully closed. Request for a written confirmation or a request reference number.

Upgrade Instead of Canceling a Card

If you're considering canceling your credit card because it lacks benefits, consider upgrading it instead.

Upgrading, or a product change, means asking your current card issuer for a new card with better rewards and features. Since you're already a customer, upgrading usually doesn't involve a hard credit check, which is good news for your credit score. Plus, it won't affect the average age of your credit history.

Be sure to check your card issuer's terms and conditions when it comes to product changes. Some card issuers limit the credit card options you can upgrade to. You cannot upgrade from a personal credit card to a business credit card, and you usually won't qualify for any welcome bonus.

FAQ About Canceling a Balance Transfer Card

You might have some lingering questions as you navigate your financial journey post-balance transfer. To help you make informed decisions, we've compiled a list of frequently asked questions.

What alternative options should you consider if you're unsure about keeping your balance transfer credit card?
What happens if you don’t use your card?
Should you cancel your card and transfer the remaining balance to another balance transfer card?

About Doug Milnes, CFA


Doug Milnes, CFA headshot

Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.

Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.


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