Can I Cancel My Store Credit Card?

While you are legally entitled to cancel your credit cards, including store cards, at any time, doing so may actually harm your credit score. Before making the decision to close an account, carefully consider why you're choosing to make this move. If you decide that you do need to close the account after all, follow the appropriate protocol to ease the blow to your score.

Debt Utilization Ratio

You may cancel your store credit card; however, before you make the decision to do so, you should weigh the effects on your credit. About one-third of your credit score is based on your debt utilization ratio, or the amount of debt you have in relationship to the amount of credit available to you. When you close an account, the margin between your balances and your available credit closes, which may bring down your credit score. How many points you'll lose depends on how much overall debt you have. The Better Business Bureau recommends keeping balances within 25 percent of the credit available to you at any time. If closing a store card will bring you above a quarter of your credit utilization, you may want to consider keeping it open.

Credit History

Another factor in your credit score that may be affected by closing your store credit card is credit history. Oftentimes, people open store cards to help build credit when they have little or no existing credit. Closing an older account may negatively impact your credit score by shortening the length of your history. Cancel only newer cards when possible.

Credit Mix

Both Fair Isaac Corp. and VantageScore count the mixture of credit types you have into their scoring models, according to Bankrate writer Gregory Taggert. Store cards contribute to the mix, and are counted as separate from traditional unsecured credit cards, so keeping one or two store cards open may be boosting your score. Other factors included in the mix are installment loans, such as mortgages or car loans, and revolving loans, such as a home equity line of credit.

Canceling

Despite the effect on your credit score, you may still decide to close your store credit card account. If you aren't using it and you're paying fees, closing your account may help to save money. For those who can't resist the temptation to spend and rack up more debt, closing a card may be less damaging than continuing to spend. Whatever your reason, you may minimize the damage by closing the account after you pay off the full balance. There's no reason to close it with a balance, and in fact, doing so will prevent you from asking for a lower interest rate in the future. Also, make sure you notify the creditor both by phone and in writing. Then check your credit report to make sure the account is listed as being closed by you and not closed by the creditor -- accounts closed by creditors are frowned upon by lenders.