Is it Bad to Cancel a Credit Card? Biblical Wisdom & Financial Stewardship
Estimated reading time: 13 minutes
Have you ever wondered if canceling a credit card is a wise financial move—or if it could bring unexpected difficulties to your financial future? Maybe you’ve had a credit card for years, but now you’re wondering—should I cancel it to avoid temptation? Or will closing it hurt my credit? These are real concerns for many Christians who want to honor God with their finances.
We’re called to be good stewards of our resources, but navigating the world of credit scores, debt, and financial responsibility in a way that honors this calling isn’t always obvious.
When it comes to managing your finances wisely, there’s always a balance to strike between what feels right and what aligns with God’s wisdom. While the Bible doesn’t speak directly about modern-day credit cards, it does teach us about stewardship, wisdom, and managing our resources well. As we explore this topic, we’ll look at when it might be wise to cancel a credit card and when it’s best to keep it open.
In Proverbs 22:7, the Bible reminds us that “the borrower is slave to the lender,” stressing the importance of controlling debt. However, canceling a credit card can have repercussions on your credit history and financial health.
In this article, we’ll explore the advantages and disadvantages of canceling a credit card and provide some faith-based financial wisdom along the way.
Table of contents
Understanding Credit and Credit Card Accounts
Before diving into when to cancel or keep a credit card, it’s important to understand how credit card accounts impact your credit score. When you cancel a credit card, several factors can be affected, including your credit utilization ratio, credit mix, and the length and depth of your credit history.
How Closing Accounts Affects Your Credit Score
Your credit score is influenced by a range of factors that credit reporting agencies consider, including credit utilization, credit mix, and payment history. Before canceling a card, it’s essential to understand how these factors impact your overall financial health. If you’re looking to improve your credit score without taking on risky debt, check out these smart, faith-based credit-building strategies.
- Credit Utilization Rate: This is the percentage of your total credit used compared to your available credit. A lower utilization ratio is generally better for your score. Canceling a card reduces your total available credit, which could increase your utilization ratio.
- Length of Credit History: The longer you’ve had your credit card accounts, the more it positively impacts your credit score. Canceling an old credit card might reduce the average age of your accounts, potentially lowering your score.
- Credit Mix: Having a mix of different types of credit, like installment loans and credit card accounts, shows that you can manage various types of debt responsibly.
- Payment History: This is the most important factor in your credit score. Consistently making payments on time can significantly improve your score, while missed or late payments can hurt it.
Understanding how closed accounts affect your credit reports can help you make an informed decision before you decide to close a credit card. While these factors are important, the credit reporting system isn’t perfect—errors and unfair reporting can negatively impact your score. Learn more about flaws in the credit reporting system and how to protect yourself from inaccurate credit reporting.
The Value of Faithfulness in Credit History
As Proverbs 13:11 reminds us, “Dishonest money dwindles away, but whoever gathers money little by little makes it grow.” Just as wise financial growth takes time, so does building a solid credit history. When considering whether to close a credit card, remember that maintaining a long-standing account can reflect faithfulness and consistency—both financially and spiritually. Being a good steward doesn’t always mean eliminating credit but using it wisely and responsibly.
When to Cancel a Credit Card
While canceling a credit card isn’t always the best financial decision, there are certain situations where it could be beneficial. Below are some scenarios when you might consider canceling a card, as well as a few specific Christian principles to consider during your decision-making process.
- High Annual Fees with No Benefits- Credit card issuers may entice borrowers to open credit accounts based on a limited promotion or sign-up bonus. If your card has a high annual fee but you no longer benefit from rewards, it may make sense to cancel. While some rewards cards can be valuable, not every credit card will provide enough perks to justify the cost.
- High-Interest Rates- If you’re carrying a balance on a card with a high interest rate, it may be wise to pay off the balance and cancel the card to avoid accruing more debt. Being a wise steward means not allowing debt to take control of your finances. Proverbs 21:20 says, “The wise store up choice food and olive oil, but fools gulp theirs down.” This scripture reminds us of the importance of careful financial management.
- Fraud Concerns- If you’ve had repeated issues with fraud or data breaches, canceling a card and closing the account could protect you from future fraud attempts.
- Juggling Accounts and Missing Payments- If you feel like your financial situation is getting overwhelming and you’ve missed payments, it may be time to simplify. Closing several credit cards or considering a Debt Management Plan may allow for a smoother repayment strategy.
- Debt Repayment Strategy- If you’re on a mission to reduce your overall debt, canceling a credit card may help remove the temptation to spend. However, remember that this could affect your credit score. Consider this prayerfully, as eliminating debt should align with both financial and spiritual goals. If you’re looking for practical ways to accelerate debt repayment, check out these three “snowflake” strategies to supercharge your debt snowball.
Managing Multiple Credit Cards While Maintaining Christian Values
Many people with multiple credit card accounts may wonder if it is bad to cancel a credit card, and for good reason. While canceling one or two cards may seem like a quick way to simplify finances, doing so without a strategy can negatively impact your credit score and financial flexibility.
If you have several credit cards, consider these five factors before deciding which—if any—to cancel:
- Which cards have the highest interest rates? Keeping lower-interest cards while paying off and closing high-interest accounts can reduce your overall debt burden.
- Are there annual fees? If you’re paying fees on a card that you rarely use and don’t benefit from, canceling it may be a wise choice.
- How will this affect your credit utilization ratio? If canceling a card significantly reduces your available credit, your credit reports may reflect a drop in your FICO score. Instead, consider paying off balances without closing the account.
- How long have you had each account? Older accounts help improve your credit history length. If you must cancel a card, try to keep the oldest one open. Having a car loan or other credit lines in good standing means closing a credit card may not affect your credit score significantly.
- Are you tempted to overspend? Having multiple credit card accounts can lead to impulse spending or accumulating unnecessary debt. Canceling one or more may help you maintain better financial discipline.
Looking for help lowering your interest rates or negotiating with your credit card company? FaithWorks Financial can guide you through the process and help you develop a debt repayment plan that aligns with your financial goals. Learn more today!
A Biblical Perspective on Managing Multiple Credit Card Balances
Having multiple credit cards isn’t necessarily wrong, but managing them wisely is essential. Proverbs 27:23 advises, “Be sure you know the condition of your flocks, give careful attention to your herds.” This reminds us to keep close track of our financial responsibilities and avoid unnecessary risk.
We can easily step from God-reliance into self-reliance and, worse yet, debt-reliance.
Before canceling any credit cards, prayerfully consider how each account aligns with your overall intentions for financial stewardship.
Avoiding the Trap of Over-Reliance
One of the dangers of relying too much on credit is that it can create a false sense of security. Instead of trusting in God’s provision, we may lean on credit limits as our safety net. Proverbs 3:9-10 encourages us, “Honor the Lord with your wealth, with the first fruits of all your crops; then your barns will be filled to overflowing.“
Keeping credit utilization low is not just good for your credit score—it also reflects a heart that prioritizes wise financial stewardship over debt dependency. Wise stewardship allows us to bless others, even in seasons of financial constraint. If you’re looking for meaningful ways to give without overspending, explore these 5 faith-based giving ideas for Christmas.
If you’re ready to reduce your debt but need assistance creating a plan that works for you, FaithWorks Financial can help. We offer Christian debt management tips and can provide tailored advice to help you meet your financial goals. Get started here.
When Canceling a Credit Card Makes Sense:
- High annual fees with no clear benefit
- Repeated security concerns or fraud risks
- High-interest rates that lead to costly debt
- You’ve reached your debt elimination goals
- The card no longer serves you and your needs
When Not to Cancel a Credit Card
Before canceling and cutting up that card, consider these reasons why keeping a credit card account open could be the better option, even if you don’t use it frequently.
- To Maintain Your Credit History- One of the key factors in your credit score is the length of your credit history. Closing a long-standing credit card account could reduce your credit score. If the card doesn’t have an annual fee and doesn’t lead to excessive spending, keeping it open may help your credit profile.
- To Manage Your Credit Utilization Ratio- A big part of maintaining a good credit score is managing your credit utilization ratio. Closing a card reduces the amount of credit available to you, potentially increasing the percentage of credit you use, which could hurt your score.
- To Keep A Diverse Credit Mix- As mentioned earlier, having a healthy mix of credit accounts—including both revolving credit (like credit cards) and installment credit—can help improve your credit score. Canceling a credit card might reduce the diversity of your credit mix, negatively impacting your score.
- Keeping Your Options Open for Emergency Use– Sometimes, having an additional credit card for emergencies can provide peace of mind. Maintaining a card for unexpected expenses can be part of a solid financial strategy as long as you don’t go deep into debt.
When Keeping a Credit Card is a Good Idea:
- To preserve the length of your credit history
- To manage your credit utilization ratio and keep it low
- To maintain a diverse credit mix
- To have a backup for emergencies
Need help with debt? Our financial experts at FaithWorks Financial are ready to help you evaluate your options, lower your interest rates, and create a faith-based plan to reach your financial goals. Schedule a free consultation today.
Weighing the Pros and Cons Prayerfully
Ultimately, deciding whether to cancel a credit card account should be a prayerful process that takes into account your financial goals, spiritual values, and credit health. While canceling can be beneficial in some situations, it’s important to avoid actions that could unintentionally harm your credit score, especially if you plan on making large purchases like a home or car in the future.
When deciding, pray for wisdom, consult with your spouse or a trusted financial advisor, and be sure to check your credit report for potential impacts before taking action. If you’re married or planning to get married, it’s also important to understand how marriage affects your credit score and what steps you can take as a couple to build a strong financial future together.
James 1:5 tells us, “If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you.”
Seeking Freedom, Not Just a Higher Credit Score
True financial peace comes from trusting God, not a credit report.
Is it bad to cancel a credit card? In some cases, yes—it could hurt your credit score, increase your credit utilization ratio, or shorten your credit history. However, in other situations, canceling a credit card can help you manage your finances wisely, reduce unnecessary fees, and limit debt.
Canceling a credit card to reduce debt can be a wise step toward financial freedom, but it should be done with the right heart. Romans 13:8 teaches, “Let no debt remain outstanding, except the continuing debt to love one another.” If eliminating credit cards helps you stay disciplined and avoid future debt, it may be the best choice.
Whether your credit score increases or decreases is less important than staying on track with an intentional financial plan that alligns with your values. If your score decreases because you made a wise financial decision, so be it.
FAQ: Common Questions About Canceling a Credit Card
To close a credit card account, first pay off the entire balance. Then, contact your credit card issuer by phone or through their website to formally request account closure, and ask for written confirmation. A few weeks later, check your credit report to ensure the account is marked as “closed,” which helps maintain your accurate account history.
Yes, closing a credit card can negatively impact your credit score. It may reduce your available credit limit, raising your credit utilization ratio, and shorten the average age of your credit accounts. This could affect your account history and reduce your credit mix, both of which are important factors in maintaining a healthy score.
No, closing a credit card does not remove it from your credit report immediately. The account will remain on your report and contribute to your account history for up to 10 years if it was in good standing, though its impact on your credit score may decrease over time.
Canceling a card may be appropriate if the credit card issuer charges high annual fees without benefits or if you’re trying to avoid accumulating high-interest debt. However, you should always consider the impact on your credit limit and credit utilization ratio before making the decision.
When you close a credit card, the available credit limit from that card is no longer included in your total credit, which may raise your credit utilization ratio. This could negatively affect your credit score, particularly if you have balances on other cards or limited available credit overall.
It’s recommended to pay off the balance in full before closing a credit card account. While some credit card companies may allow you to close an account with an outstanding balance, interest and fees will continue to accrue until the balance is paid off. This could lead to complications and hurt your credit history if payments are missed.
Struggling to manage high-interest debt? FaithWorks Financial is here to help with debt management and negotiating better terms with your credit card issuer. Contact us for assistance.
