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The term amortization is usually used to refer to the process in which debt is paid off on a set schedule, with fixed payments each month. An amortization schedule can show you the amount of your payment that goes toward the principal and interest each month. Because credit cards are considered revolving loans, amortization is not often used with credit cards.

However, a credit card amortization schedule can be helpful if you’re trying to pay down your balance. Understanding credit card amortization can help you decide how big your payments should be each month, as well as what the impact of additional credit card payments would be.

What Is Amortization?

Amortization is the process where debt is paid down on a set schedule, usually with fixed monthly payments. One common example is a 30-year mortgage — each month, you make a mortgage payment for the same amount.

Every time you make the mortgage payment, part of your payment is an interest payment, and part of the payment goes toward paying down your mortgage principal. Each month, as the principal balance goes down, more and more of your monthly payment goes toward the principal, until the mortgage is completely paid off.

Recommended: When Are Credit Card Payments Due

What Is Credit Card Amortization?

Because credit cards are considered revolving debt — meaning you can continually borrow and repay your debt — they don’t have amortization in the same way that a mortgage or car loan does. However, one area where a credit card amortization schedule may apply is if you’re trying to pay down a credit card balance.

In this instance, understanding the amortization schedule for your credit card can help you decide how making additional payments to your credit card issuer will impact your overall balance.

Recommended: How to Avoid Interest On a Credit Card

How Does Credit Card Amortization Work?

One of the credit card rules is that the higher your balance is, the more interest you’ll owe each month.

To be more specific, by only making the credit card minimum payment, it could take you many years to pay off your debt. If you’ve decided to rein in your credit card spending and pay down your balance, you can use a credit card amortization schedule to determine how long it will take.

Looking at credit card amortization will allow you to see how much less you’ll owe with each subsequent payment — assuming you’re no longer actively using your credit card. This schedule will take into account your current balance, your card’s annual percentage rate (APR), and how much you can afford to pay off each month. Then, you can determine how many months it will take until your balance is paid off in full.

Factors That Affect Credit Card Amortization

One of the biggest factors that affects a credit card amortization schedule is the interest rate on your credit card. The higher your credit card interest rate, the more of each monthly payment that will go toward interest. That will mean your amortization schedule will last longer.

Another factor to consider is the consequences of credit card late payments. If you delay credit card payments and incur late fees, that will increase your overall balance. That will also increase your amortization schedule and extend the length of time it will take to pay down your total credit card balance.

Guide to Calculating Credit Card Amortization Period

Since credit cards are considered revolving debt, it can make it difficult to calculate a credit card amortization period. If you continue to use your credit card for new purchases, you won’t be able to calculate an amortization period because your total balance will change each month.

One way you can calculate a credit card amortization period is if you decide to stop making any purchases on your card. If you have a $5,000 balance on your credit card, you can use any online amortization calculator and input the credit card payment amount you want to make each month. The resulting amortization schedule will show how long it will take to completely pay off your credit card, assuming you make payments by your credit card payment due date.

Debt Consolidation and Credit Card Amortization: What to Know

If you’re looking to lower your credit card debt, one option is credit card debt forgiveness. But because this isn’t always easy to get, another is to consolidate your debt by taking out a personal loan.

Unlike revolving loans which are what a credit card is, a personal loan is a type of fixed loan that has an amortization schedule. Following that amortization schedule lets you know when you’ll completely satisfy your debt obligation.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

The Takeaway

An amortization schedule shows how much of each loan payment goes toward interest and how much goes to principal. Because credit cards are considered revolving debt, they don’t have amortization schedules in the same way that fixed loans do. Still, you can use a credit card amortization schedule as a tool if you’re trying to eliminate your credit card balance.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What does credit card amortization payment mean?

If you’re looking to pay down or eliminate your debt, one strategy is to stop making any new purchases with your card. That way, you can concentrate on lowering your total payment. If you only make the credit card minimum payment each month, it could take years before you pay off your balance. Following a credit card amortization schedule can help pay off your debt sooner.

How can I calculate my credit card amortization period?

A credit card amortization period mostly makes sense if you stop making any new purchases on the card. If you’re still regularly using your credit card, your total balance will change with each purchase and payment. On the other hand, if you aren’t regularly using your card for new purchases, you can calculate your credit card amortization period using your total balance, interest rate, and monthly payment amount.

What is a credit card amortization term?

An amortization term is how long it takes to completely pay off a loan. If you’re making regular payments on the credit card payment due date each month, you’ll gradually lower your total credit card balance. A credit card amortization term can make sense if you are no longer actively using your card and focusing on eliminating your debt. You can use your total balance, interest rate, and the amount you’re paying each month to figure out how long it will take to eliminate your balance.

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Photo credit: iStock/AmnajKhetsamtip

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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You may or may not be able to reopen a closed credit card. More specifically, the reason why your credit card account was closed in the first place will make a difference, as well as whether your specific credit card issuer allows the reopening of closed accounts.

Though your request may get denied, it can still be worthwhile to ask to reopen a closed credit card account if you really want to do so. Here, a closer look at why your account may be closed and how to reopen a closed credit card account.

Can You Reopen a Closed Credit Card?

Whether or not you can reopen a closed credit card will depend on several factors, including:

•   The reason why your credit card is closed

•   Whether your credit card issuer allows cardholders to reopen accounts

•   How long ago the credit card account was closed

For instance, if the issuer closed your credit card account due to nonpayment, you most likely won’t be able to reopen it, given what a credit card is and the risk a lender assumes. However, if you chose to close the account yourself and now regret the decision, you may be able to get the credit card reinstated.

Why Your Credit Card May Be Closed

There are several reasons why your credit card may be closed, such as:

•   Your account was inactive: If you haven’t used your credit card in a number of months or years, your issuer may decide to close a credit card due to inactivity.

•   Your account was considered delinquent: Most issuers will close your account if you haven’t been paying your bills or are in default. Although the account is closed, you’ll still owe the amount borrowed when closing a credit card with a balance.

•   Your credit score dropped: Though not always the case, if a credit card issuer notices red flags, such as a sharp drop in your credit score or major negative remarks on your credit report, it may choose to revoke your card.

•   You didn’t agree to the new terms: Sometimes credit card issuers update their terms and conditions and need you to agree to them before continuing to use the new card. If you don’t agree to the terms, your card may be closed.

Recommended: Does Applying for a Credit Card Hurt Your Credit Score?

Reopening a Closed Credit Card Account

If you decide you want to reopen a closed credit card, here’s how you do it.

Review the Reason for the Account Closure

Assuming you didn’t contact the credit card company to cancel a credit card yourself, you’ll need to determine the reason why the issuer did. It’s most likely due to one of the five reasons mentioned above.

Consider when you last used the credit card, whether you’ve had to agree to new terms, or if you were behind on payments. Credit card issuers may not notify you when the account is closed, so if you’re unsure of the exact reason why, it’s best to contact them.

Gather Relevant Documentation

Before asking the credit card issuer to reopen your account, it’s best to be as prepared as possible so you’re as efficient as you can be. For one, you’ll need to ensure that you have the credit card account number — you can find it on your physical credit card or a previous credit card statement.

If you were delinquent on your account, you may need to provide other forms of proof, such as documentation like that you’ve paid back the credit card balance you’d owed. Your card issuer may also want other information, like your full name, address, and Social Security number.

Contact Your Card Issuer

Finding the best number to call can be as simple as checking the back of your physical credit card or looking up the issuer’s phone number on their website. Otherwise, you can try calling your credit card issuer’s general customer service number and asking to be transferred to the relevant department.

When you request to reopen the account, you may be asked to provide a reason why you want to do so. Additionally, you may need to address any concerns or issues that caused your account to get closed. For instance, if your card was closed because you didn’t agree to new terms, then you’ll need to do so.

If your request is approved, you should receive information about the account, such as whether the account number is the same and if you can keep any rewards you’d earned before the account closure. Some issuers may conduct a hard credit inquiry to make sure you can still qualify for the credit card in question.

Things to Know When Reopening a Closed Credit Card

If you’re reopening an account you held previously, you might find some differences in how a credit card works. Here’s what to look out for specifically if you reopen a closed credit card.

Fees and Interest Rates May Be Different

The annual percentage rate (APR) and fees for the credit card may have gone up or down. Before you reopen your account, it’s best to check all of the card’s terms and conditions to determine whether you want to proceed.

Recommended: How to Avoid Interest on a Credit Card

Your Credit Limit Might Be Lower

Depending on the issuer and other factors like your credit score, your credit limit may be lower than the original amount you were approved for. You may have to wait a few months or demonstrate that you can adhere to key credit card rules, like consistently make on-time payments, before you’re approved for a larger credit line.

Recommended: What is the Average Credit Card Limit?

You May Lose Out on Previously Unused Rewards

If you’d racked up rewards before closing your credit card account, you may not be able to access any unused points or miles after your credit card gets reopened. However, it doesn’t hurt to ask the credit card issuer if it can reinstate the rewards — though remember there’s no guarantee it will happen. This is why checking your credit card balance and your rewards balance is important to do before closing out a credit card account.

How Long Does a Closed Account Stay on Your Credit?

How long a closed account remains on your credit report will depend on whether it’s based on a negative remark. For accounts that were in good standing, the closed account can remain on a credit report for up to 10 years and will generally help your credit score. However, if the closure was due to an adverse remark, such as delinquency, it could remain on your report for up to seven years.

How Closing a Credit Card Can Hurt Your Credit

The decision to close a credit card can weigh negatively on your credit score. Specifically, here’s how closing a credit card affects your credit:

•   Increases your credit utilization: Once a credit card is closed, your overall credit limit is lowered. This typically increases your credit utilization ratio — the percentage of your total available credit that you’re currently using — even if your credit card balance remains the same. A high credit utilization ratio can lower your credit score.

•   Decreases your credit mix: Though it may not affect your credit score that much, closing a credit card means there may not be as many different types of credit in your credit history. If so, this could affect your score negatively depending on the other types of accounts you have.

•   Potentially lowers the average age of your credit accounts: If the closed credit card account was one of your oldest accounts, it could lower the age of your credit history. This can negatively affect your credit score.

Reopening a Closed Credit Card Account vs Getting a New Credit Card

Although there may be advantages to reopening a credit card, such as accessing a high credit limit or offered perks, you’ll have to open a new one if your issuer refuses your request. You might also look into getting a new card instead of going back to your old one if you think you could access better rewards or more favorable terms than your closed card offered.

Whatever your needs and credit score are, it’s best to do some research to find a card that you have a high chance of qualifying for and that offers features you want.

When Not to Reopen a Closed Account

Sometimes, it’s better to leave a closed credit card account closed. Instead, you could use the account closure as an opportunity to search for a better credit card that may have a lower interest rate or offer better rewards, for instance. You could even look into options offered by the same credit card issuer.

Plus, there are some valid reasons for when to cancel your credit card, like if it had an unnecessarily high annual fee. In those instances, it’s likely not worth second guessing your decision.

Alternatives to Consider if You Can’t Reopen Your Account

If you can’t reopen your account, you’re not out of luck. Here are some other options to consider in this scenario:

•   Consider applying for a different card with the issuer. One option is to see what other cards your issuer offers and open one of those instead. Before submitting an application, check to see what the terms and conditions are and whether it has the features you’ll want and need.

•   Take steps to build your credit. If your account was closed due to delinquency, you can focus for a few months on making on-time payments or taking other steps to build your score. Then, you could try again to reopen your card or simply apply for a different one.

•   Apply for easier-to-get funding sources. If you need funding, you can also consider applying for a secured credit card, which is backed by a security deposit that serves as collateral. Secured credit cards tend to be easier to qualify for due to the deposit you’ll make.

Using Your New Credit Card Responsibly

Whether you’re reopening a closed credit card or applying for a new one, using a credit card responsibly is critical. By doing so, you can work to remain in good standing with your credit card issuer and build your score over time. Here are some tips for responsible credit card usage:

•   Don’t spend more than you can afford to pay off each month.

•   Always try to pay off your balance in full to avoid incurring interest charges.

•   Make sure to submit payments on-time (setting up automatic payments can help).

•   Regularly review your credit card statements and credit report to check for any errors or indications of fraudulent activity.

Recommended: When Are Credit Card Payments Due?

The Takeaway

Reopening a credit card can be as simple as contacting your issuer. However, whether or not you’ll get your request fulfilled will typically depend on the reason your account was closed and how long it’s been since you last used the card.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Can you reopen a closed credit card due to inactivity?

You may be able to reopen a credit card closed because of inactivity. However, whether you can do so will ultimately depend on your credit card issuer and their policies on reopening credit cards.

Can you reopen a closed credit card due to nonpayment?

In most cases, you probably won’t be permitted to reopen a card that got closed due to nonpayment. You may be able to if you can demonstrate to your credit card issuer that you’ve paid back the balance due and can be responsible with payments.

Will I get back my rewards if I reopen a closed credit card?

You most likely won’t be able to get your rewards back. Still, it doesn’t hurt to ask your credit card issuer just to make sure.

Do all credit card issuers allow you to reopen closed credit card accounts?

Many credit card issuers won’t allow account reopening, though some do. To find out if yours does, you’ll need to contact them directly.

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Photo credit: iStock/insta_photos

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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When checking out at a store, you might be prompted to select whether you want the purchase processed as a credit or debit card transaction. Some debit cards with a credit card network logo can be processed as a credit payment, but the reverse — processing a credit card as a debit transaction — isn’t possible.

Still, it can make sense to use credit cards like a debit card. Understanding the difference between a credit card and debit card can help you to make strategic purchasing decisions with your credit card.

Recommended: What is a Charge Card

Can You Use a Credit Card Like a Debit Card?

In terms of being a convenient, cashless payment method, a credit card can be used in-person or online in a similar way as a debit card. Credit cards require you to insert, swipe, or tap the card on a payment processing device to initiate a transaction. If used online, you can enter your credit card information into the payment field at checkout in the same way you would with a debit card payment.

However, there are also significant differences between a credit card and debit card. The most notable distinction is where the funds come from. When you use a credit card, the money is drawn from your card’s available credit line, and you might get charged additional fees and interest on your purchase.

In contrast, a debit card draws the funds you already have in an associated checking or savings account. Also, in certain situations where the final total amount might vary, such as at the gas pump, the processor might request that your card issuer place a temporary hold on your debit card funds to ensure you have enough funds to cover the transaction.

Recommended: How to Avoid Interest On a Credit Card

Reasons You May Want to Use a Credit Card Like a Debit Card

Although credit cards offer numerous advantages when used responsibly, there are valid reasons to prefer using a credit card as a debit card. This may include:

•   To avoid overspending. Debit cards, particularly when you’ve opted out of overdraft protection, help you to avoid spending more than you can afford to pay back. With a debit card, you can only use the funds already in your associated account, which is a tactic you could try with a credit card as well.

•   To avoid finance charges or extra fees. Debit cards generally incur few charges. Additionally, they do not accrue interest since debit transactions are immediately pulled from your deposit account, in contrast to how credit cards work.

•   To amass rewards without debt. The potential to earn credit card rewards is appealing, but “chasing points” can be a risky game if you overspend. The ability to use a credit card like a debit card can help keep your spending in check while earning rewards.

Recommended: Tips for Using a Credit Card Responsibly

Tips for Using a Credit Card as a Debit Card

You can’t technically process a credit card payment as a debit card purchase. But if your purchasing strategy is to use a credit card as your go-to payment method instead of a debit card, remember the following tips and credit card rules:

•   Don’t spend more than you can afford.

•   Do pay your monthly credit card statement in full.

•   Don’t pay your credit card bill late or skip a payment.

•   Do explore credit card rewards programs to earn incentives on purchases you already make.

•   Don’t forget to review annual percentage rates (APR) and fees associated with your card.

•   Do use a credit card for online payments for greater fraud protection.

Recommended: When Are Credit Card Payments Due

Pros and Cons of Using a Credit Card Like a Debit Card

The benefits of credit cards in comparison to debit cards vary since they’re two distinct banking products. However, each payment option has its own pros and cons.

	Pros	Cons
Credit Card	•   Offers greater purchasing power •   Can buy items now and pay for them later •   Helps build your credit •   Potentially zero liability for unauthorized charges	•   Can accumulate burdensome debt •   Late and missed payments adversely affect your credit score •   Can incur interest charges and fees
Debit Card	•   Avoids debt by using cash you already have •   No additional interest charges on purchases •   Can request cash back at checkout	•   Buying power is limited to the funds you have •   Insufficient funds may lead to overdraft fees •   Doesn’t help build credit •   Fewer protections with fraudulent charges

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Alternatives to Using a Credit Card Like a Debit Card

If you’re averse to using a credit card in a traditional sense, there are a few alternatives payment options that are akin to a debit-style transaction:

•   Prepaid credit card. A prepaid credit card gets loaded with funds which then become your card’s available credit line. It gives you the convenience of a credit card but taps into cash you already have, which is similar to a debit card. Note that prepaid cards often incur fees for various types of activity.

•   Cash-back rewards debit cards. If you want the perks of a credit card, like cash-back incentives, but in the form of a debit card, a cash-back debit card might be an option. These limit you to spending the funds you already have on deposit, but let you earn cash back when you use the card.

The Takeaway

Using a credit card like a debit card ultimately boils down to only spending on your card with funds you already have. Since a credit card is essentially a loan, it’s easy to accumulate overwhelming debt, plus interest charges, if you’re overspending. If you can comfortably afford to repay your credit card transactions in full each month, using your credit card in lieu of a debit card can provide access to valuable benefits, like earning rewards, enhancing fraud protection, and possibly building your credit.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Can I transfer money from my credit card to my bank account?

No, you can’t transfer money from your credit card to your bank account. A bank account is a deposit vehicle for your available cash; this cash can be accessed using a debit card. Conversely, a credit card is a financial tool that lets you access a credit line that you need to repay.

Can I use my credit card like a debit card at an ATM?

Yes, you can use your credit card like a debit card to get a cash advance at an ATM. Be warned that this is a costly option. Credit card cash advances typically have a different limit compared to your purchase limit, and they usually charge a higher APR with no grace period. Plus, you’ll owe a cash advance fee.

Can I use a credit card as a debit card with no interest?

Possibly. You might be able to use a credit card like a debit card for everyday transactions without incurring interest, if you pay every billing statement in full each month. Rolling over a balance month after month, however, will cause you to incur interest charges.

Is it better to use a debit or credit card?

Whether using a debit or credit card is a better option depends on the types of purchases you’re making and your borrowing habits. For example, credit cards are generally safer when shopping online, but buying on credit can get out of control quickly if you’re not careful.

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Photo credit: iStock/filadendron

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Closing a credit card with a balance remaining is possible to do. However, keep in mind that even if your credit card account is closed, you’ll still have to pay off the remaining balance. Additionally, you’ll need to cover interest that’s accrued as well as any fees, and you could face other consequences, including losing out on rewards and seeing potential impacts to your credit score.

Still, there are instances when closing a credit card can be the right move. If you’re thinking about closing a credit card account with an outstanding balance, you’ll want to weigh these considerations — and also ensure you have a plan for paying off your remaining balance.

Recommended: How to Avoid Interest On a Credit Card

What Happens If You Close a Credit Card Account With a Balance?

Once you’ve closed a credit card account with a balance, you’ll no longer be able to use that card to make purchases. Beyond that, here’s what else you can expect after your account closure.

Payment of Balance and Interest

Perhaps the most important thing to keep in mind when a credit card is closed with balance is that you’re still liable for the credit card balance you’ve racked up. You’ll also owe any interest charges that have accrued on your outstanding balance.

As such, expect to continue receiving monthly statements from your credit card issuer detailing your balance, accrued interest, and minimum payment due. And until you’re absolutely positive your debt is paid off, keep on checking your credit card balance regularly.

Recommended: What is a Charge Card

Loss of Promotional APR

If the card you closed offered a promotional interest rate, this offer will likely come to an end. If you’ve been carrying a balance on a credit card, your balance could start to accrue interest. Plus, you may have to pay the standard APR (annual percentage rate) on the remaining balance rather than the lower promotional rate.

Recommended: Can You Buy Crypto With a Credit Card

Loss of Rewards

Before you move forward with canceling a credit card that offers rewards like points or airline miles, make sure you’ve redeemed any rewards you’ve earned. That’s because you may forfeit those rewards if you close your account.

Policies on this can vary from issuer to issuer though, so just make sure to check with your credit card company to be safe rather than sorry.

How Closing Credit Cards With Balances Can Impact Your Credit

There are a number of ways that closing credit card accounts with a balance can adversely affect your credit score given how credit cards work. Closed accounts in good standing will remain on your credit report for 10 years, whereas those with derogatory marks may fall off after seven years.

For starters, closing your account could drive up your credit utilization ratio, one of the factors that goes into calculating your score. This ratio is determined by dividing your total credit balances by the total of all of your credit limits. Financial experts recommend keeping your ratio below 30% and preferably closer to 10%. Losing the available credit on your closed account can drive up this ratio.

Closing your account can impact your credit mix, as you’ll have one fewer line of credit in the mix.

Closing a credit card could decrease your length of credit history if the card you closed was an old one. This too could potentially decrease your credit score.

That being said, the impacts can vary depending on your credit profile and the credit scoring model that’s being used. If, after closing your account, you pay off your account balance in a timely manner and uphold good credit behavior across other accounts, your score can likely bounce back.

Recommended: What is the Average Credit Card Limit

Is Keeping the Credit Card Account Open a Better Option?

In some scenarios, it may make sense to keep your credit card active, even if you don’t plan on spending on the card. Here’s when opting against closing your credit card account might be the right move:

•   When you can switch credit cards: If your card carrier allows it, you might be able to switch to a different credit card it offers rather than closing out your account entirely. This might make sense if you’re worried about your card’s annual fee, for instance. You’ll still owe any outstanding debt on the old credit card, which will get moved over to the new card (the same goes if you happen to have a negative balance on a credit card).

•   When you have unused credit card rewards: With a rewards credit card, closing the account may jeopardize the use of earned rewards. Avoid that scenario by keeping the credit card active until you’ve used up all the rewards earned on your current credit card or at least until you’ve transferred them to a new credit card, if that’s an option.

•   When you don’t use the credit card: Even if you don’t use your credit card or use it sparingly, keeping the card open could build your credit score. This is because creditors and lenders usually look more favorably on credit card users who don’t rack up significant credit card debt, which is why maintaining a low credit utilization ratio is one of the key credit card rules to follow.

Nevertheless, there are certainly some scenarios when it can make sense to say goodbye to your credit card account. Here’s when to cancel your credit card, or at least consider it:

•   You want to avoid the temptation to spend.

•   You want to stop paying your card’s annual fee.

•   The card’s interest rate is rising.

•   You’d like to have fewer credit card accounts to manage.

Guide to Paying Off a Credit Card Balance

No matter what you do with your credit card account, you’re going to have to pay down your credit card debt. Here are some options you can explore to pay off your closed credit account with a balance as soon as possible.

To avoid making that mistake, here are some options you can explore to pay off your closed credit account with a balance as soon as possible.

Recommended: Tips for Using a Credit Card Responsibly

Debt Consolidation Loans

A personal loan at a decent interest rate can make it easier to curb and eliminate your card debt. Once the funds from the loan hit your bank account, you can use the cash to pay off all your credit card debts. Then, you’ll only have to keep track of paying off that one loan with fixed monthly payments, making it easier to manage.

Keep in mind that you’ll generally need good credit to secure a personal loan with competitive terms, though.

Recommended: When Are Credit Card Payments Due

Balance Transfer Credit Cards

A balance transfer card with a 0% introductory interest rate can buy you some time when paying down debt. You can transfer your existing debt to the new card, allowing you to pay down credit card debt at a lower interest rate, without racking up any additional interest payments during the promotional period.

Just make sure to pay off the entire balance before the card’s introductory interest rate period ends and the interest rate rises significantly. Otherwise, you may be right back where you started — with high credit card debt and a high interest rate. That’s not likely to be a good way to use credit responsibly. Also note that a ​​ balance transfer fee will likely apply.

Debt Avalanche or Snowball

For credit card debt repayment, consider the debt avalanche or snowball approach.

With the avalanche debt repayment method, you prioritize paying off your credit card with the highest interest rate first. Meanwhile, you’ll maintain minimum payments on all of your other debts. Once your highest-rate debt is paid off, you’ll roll those funds over to tackle your balance with the next highest interest rate.

The snowball method, on the other hand, is all about building up momentum toward debt payoff. Here, you pay as much as possible each month toward your credit card with the lowest outstanding balance, while making minimum payments on all of your other outstanding debts. When the smallest debt is paid off completely, repeat the process with the next smallest balance.

Debt Management Plan

If you’re still having trouble paying down your credit card either before or after you close the account, that could be a red flag signaling that you need help. In this case, consider reaching out to an accredited debt management counselor who can set you on the right path to credit debt insolvency.

In addition to helping you create a debt management plan, a credit counselor can help by negotiating a better deal on interest rates and lower monthly payments. That could result in paying down your credit card debt more quickly, which not only saves you money, but also helps protect your credit score.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

The Takeaway

If you decide to close your credit card account with a balance, it’s critical to do so in a way where your debt obligations are covered and your credit score is protected. The key to doing the job right is to work with your card company, keep a close eye on outstanding balances and payment deadlines, and work aggressively to pay your card debt down as quickly as possible.

Since closing a credit card can have consequences, it’s especially important to consider a credit card ‘s pros and cons carefully before you apply.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Can you close a credit card with a balance?

Closing a credit card with a balance is possible. However, you’ll still be responsible for the outstanding balance on the card, as well as any interest charges and fees.

Does it hurt your credit to close a credit card with a balance?

Closing your credit card with a balance remaining has the potential to impact your credit score. However, the exact implications for your score can vary depending on your overall credit profile and which credit scoring model is being used.

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

That depends on your personal situation. Closing a card for good may impact your credit score, but you also won’t be able to use the card again and risk racking up unwanted debt in the process.

What happens if you close a credit card with a negative balance?

If you close a credit card with a negative balance, that means the card issuer owes you money instead of vice versa. In this situation, the card issuer will typically refund you that money before closing out the account.

How do I close a credit card without hurting my credit score?

You can mitigate the impacts of closing your account by paying off the balance on that account and all other credit card accounts you have. If you have $0 balances, then closing your account and losing that available credit won’t affect your credit utilization rate.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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