Closing a credit card with a balance

We’ve taken a deep dive into some commonly asked about areas when it comes to closing a card with an outstanding balance still on it.

If you’re wondering what you can do about an open credit card that’s still got a balance on it, we’ve taken a start-to-finish look at everything from the pros and cons to alternative options.

Can you close a credit card with a balance?

Whether it’s £10 or £1,000, you can’t close a credit card account if you’ve got any outstanding balance left on it - you must clear it first.

If you want to get the ball rolling though, you can speak to your provider and let them know you’re planning on cancelling. However, they’ll still keep your account open and visible on your credit report until your debts are completely wiped.

Should I close my credit card?

If you’re thinking about shutting down a credit card, make sure you carefully consider the pros and cons first - the damage it could cause might surprise you.

Reasons to keep your credit card open

• Have access to credit in the event of an emergency.
• Spend safely with the added protection (Section 75 of the Consumer Credit Act) that comes with buying on your plastic.
• Keep using any cashback and rewards attached to your card.
• Keep your credit utilisation ratio balanced
• Hold on to the credit-score-boosting benefits a longstanding credit card with a good track record gives you.

Reasons to close your credit card account

• The credit limit is too tempting, and you don’t trust yourself to overspend.
• Access attractive new customer deals being offered by other creditors.
• Simplify balancing several lines of credit.
• Having lots of available credit can be off-putting to other lenders.

How to close a credit card with a balance

1. Clear any outstanding balance. The quicker you do this, the quicker you’ll be able to close your account.
2. Call your provider. Although a lot of credit card providers let you cancel your account online, it might be worth speaking to someone first to see if there are any outstanding fees or pending transactions that could affect your account.
3. Organise any outgoing payments. If you’re currently using your card to make automatic payments, such as to a monthly mobile phone contract or utility bill, be sure to re-route the payments before closing the card. If you don’t, it could go down as a missed or late payment and harm your credit score.
4. Make the most of any leftover rewards points. To make sure they don’t go to waste, either redeem them or transfer them (if you can).

Is it better to close a credit card or leave it open with a zero balance?

Deciding whether to close a credit card or leave it open with a zero balance can be a tricky decision. Here are some key points to consider:

Benefits of leaving a credit card open with a zero balance

• Improved credit utilisation ratio: Keeping a credit card open with a zero balance can help maintain a low credit utilisation ratio, which is the percentage of your total available credit that you are using. A lower ratio can help improve your credit score.
• Longer credit history: The length of your credit history is a significant factor in your credit score. By keeping older cards open, you can benefit from a longer credit history, which can improve your score. If the card remains unused, it can positively impact your credit utilisation ratio.
• Access to credit in emergencies: An open credit card with a zero balance can serve as a financial safety net in case of emergencies.
• Potential rewards and benefits: If your card offers rewards, cashback, or other benefits, you can continue to take advantage of these perks without incurring debt.

Reasons to close a credit card

• Avoiding temptation: If having an open credit card tempts you to overspend, it might be better to close the account to avoid accumulating debt.
• High annual fees: If the card has a high annual fee and you’re not using it enough to justify the cost, closing it might make financial sense.
• Simplifying finances: Closing unused credit cards can simplify your financial management, especially if you have multiple cards.

Considerations before closing a credit card

• Impact on credit score: Closing a credit card can increase your credit utilisation ratio and shorten your credit history, both of which can negatively impact your credit score.
• Future credit needs: If you plan to apply for a loan or mortgage soon, it might be wise to keep the card open to maintain a stable credit profile.

The decision to close a credit card or leave it open with a zero balance depends on your personal financial situation and goals. Weigh the pros and cons carefully to make the best choice for your circumstances.

What are my other options?

If you’re certain you want to close your credit card, but you don’t have the funds to clear your outstanding balance, you’ve still got a couple of options to turn to.

1. Move your balance to a balance transfer credit card

Balance transfer credit cards allow you to move your debt from one credit card provider to another. You won’t escape your balance, but you might be able to move it elsewhere.

So, why do this? Because you could transfer your debt to a card with a better interest deal and clear your credit quicker. In fact, lots of balance transfer credit cards come with 0% introductory periods, allowing you to completely waive interest rates and focus entirely on repaying what you owe.

However, not everyone will qualify for a balance transfer card. Lenders typically require a good credit score to access the best deals, and approval isn’t guaranteed. If you have a poor credit history, you may be offered a higher interest rate or be declined altogether.

Also, remember that introductory periods don’t last forever, so try to clear your balance before it expires to avoid interest charges.

Another thing to note with this option is that you’ll usually be charged a balance transfer fee—typically around 3% of the total amount you’re transferring.

2. Negotiate with your provider

If you’re thinking about closing your credit card because of rising fees or missing out on new customer perks, it’s worth calling your provider first.

They may be willing to waive or reduce fees, offer a better interest rate, or even match new customer deals to keep you as a customer. It doesn’t hurt to ask!