5 Reasons to Close a Credit Card Even When It Hurts Your Credit Score

Closing a credit card could knock anywhere from three to 30 points off your credit score. That's one reason so many folks advocate for keeping old credit cards open, even when you never use them. There's often no harm in doing so; it keeps your credit report healthy.

But here's the thing: Sometimes, closing your credit card is the right move, even when it hurts your credit score. Reasons to close your credit card include threats to your peace of mind and dodging yearly fees. Find five good reasons to close your card below.

1. It brings you peace of mind

It's totally reasonable to close a credit card for the same reason you opened one: to bring you peace of mind. Credit cards are great because they let you be flexible with money. You can spend even when your direct deposit is tomorrow and your checking account balance is low.

If keeping an old credit card open threatens your peace of mind, it may be worth closing, even with a credit score drop. You don't want to stress over cards. Credit cards should make your life easier, not harder.

2. The credit score drop is minimal

Often, you won't lose a lot of credit score points for closing a card. There are a few reasons for this. One of the big ones is that your credit card history stays on your credit report for 10 years post-closing. It may be years before closing your credit card hurts your score.

Another reason the drop might be small is if you have more than one credit card. A single credit card vanishing from your report could inflict major damage by sharply reducing your credit history, but closing one of three cards would inflict less damage.

In a similar vein, closing a recently opened credit card will typically harm your credit score less than closing your oldest card. Again, closing your oldest card would have the most severe effect on your credit history, but closing a new credit card might barely change your score.

3. Your credit card charges you annual fees

It may be worth closing a credit card that charges you a yearly fee.

The Capital One Venture X Rewards Credit Card charges users an annual fee of $395 (see rates and fees). That's fine when you're getting your money's worth, but if you're not using the card, you're burning money in your checking account. Closing an account is probably worth it if it saves you hundreds in wasted fees.

4. Your interest rate went up

Credit issuers can increase the interest rate on your credit card. If you carry debt, that's bad. You'll pay more for carrying balances across credit cycles. Say you carry a $1,000 balance. An interest rate bump from 20% to 25% would cost you $50 more interest fees that month.

Fun fact: you can totally opt out of rate hikes like these. The CARD Act of 2009 makes credit card companies notify you before hiking rates. You can reach out to them and request to opt out. The downside is that your credit issuer will probably close your credit card.

If you carry a chunky balance on your credit card, it could be worth opting out of interest rate hikes. Even if your credit score takes a hit, you'll save money in the short term.

5. You're spending too much

Credit cards sometimes act like logs tossed into a smoldering bonfire. They create strong incentives to spend. Case in point: my DoorDash Rewards Mastercard® got me such good returns that I bought a lot more takeout meals from DoorDash than I probably should have.

If you're spending too much, it may be worth closing a card. It could have immediate positive effects on your spending budget. The less you spend, the more money you have to stash into a savings account for a rainy day (or a sweet summer vacation).

Worried about your credit score dropping? You can sometimes close a credit card without hurting your credit score. Check out your options to make the best decisions moving forward.