When you take out a new credit card, it’s unlikely that you have a plan for what to do if the bank decides to pull it out of circulation. You might not even know that credit cards can be discontinued and taken away if you don’t do anything wrong, but they can — and it’s more common than you might think. If you have a card in your wallet that your bank has decided to put out to pasture, you might be wondering if you should just cancel it altogether. Here’s what you need to know before you do anything.
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Why Do Credit Card Companies Discontinue Old Cards?
Banks and other card providers take old cards out of circulation for all kinds of reasons. In some cases, an airline, hotel chain or store will end a partnership with an old credit card partner and starts fresh with a new one. This happened when Costco ended its partnership with American Express in 2015 over cost-related issues, according to the Wall Street Journal. Two years later, Hilton dropped Citi in favor of none other than Costco’s jilted former partner American Express.
In other cases, a credit card company will update a stale card with a similar, but rebranded version of itself. Sometimes they’ll swap out old cards with dated benefits programs for new ones with fresh rewards structures.
In those cases, you’ll likely be able to keep your old card, should you choose, until the new one debuts. At which time, you’ll be converted to the updated card. Some cards even let legacy users continue using their old cards for years after they’ve been discontinued and replaced.
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Expect The Same Results When You Cancel Any Card, Discontinued or Not
In other cases, you might find out that your card is being discontinued outright with no souped-up version coming to replace it. If that happens, the decision about whether or not to cancel has likely been made for you. If the issuer doesn’t provide you with a similar but unrelated card, your account will probably be canceled whether you want it to or not.
In most cases, that’s bad luck for you. Canceling a card is rarely good for your credit — whether they cancel it or you do, and whether it was discontinued or not. There are two reasons:
- If you cancel a card that you’ve had for a long time, you can shorten the length of your credit history. Accounting for 15% of your total score, credit age is important, but it has only a medium impact.
- If you cancel a card, you reduce your available credit and increase your credit utilization, also called your debt-to-credit ratio. Unlike the age of your credit, this is a huge deal that’s almost certain to dent your score, at least temporarily. It accounts for a full 30% of your score, second only to your all-important payment history, which makes up 35% of a Fico credit score.
So, in most cases, no, it doesn’t make sense to cancel a discontinued card — or any card, for that matter — unless there’s a compelling reason like an unjustifiably high annual fee.
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If You Do Cancel, Make Sure You Do It Right
If you do decide to cancel a card — irrespective of whether it was discontinued — don’t rush into it without a plan. According to CNBC, there are six steps to safely cancel a credit card:
- Make sure you pay off any remaining balance in full
- Redeem all your rewards, use all your perks, and claim all your benefits
- Call your credit card company and cancel over the phone — be prepared to receive a retention offer
- Follow up your call with a physical cancellation letter and ask for a written confirmation that your account has been closed
- Check your credit report to make sure the report indicates the account was “closed at consumer’s request,” or something similar, not something like “closed by issuer”
- Shred your card or cut it into lots of little pieces — this is still an important final step
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Last updated: Oct. 11, 2021