Do I Have to Pay Interest on a Closed Credit Card?

Close up of stack of credit cards
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You likely already know your credit card issuer charges monthly interest on outstanding balances on an open credit card. But what if the account is closed? Will you still have to pay interest?

Interest is charged on credit card balances that aren't paid in full by the due date. Your credit card issuer won't stop you from closing your credit card while it still has a balance, but closing the account doesn't relieve you of interest payments. Once you close an account, you'll continue to be charged regular interest until you've reached a zero balance.

What Closing a Credit Card Really Means

Even though you've closed your credit card, your credit card agreement is still in effect. That means each billing cycle that you still have a balance, a finance charge will be added to your account. The finance charge is calculated based on your balance and your interest rate.

The APR on your credit card balance doesn't change after you've closed your credit card account unless you have a variable APR or the credit card issuer gives you advance notice about the rate increase.

What does change when you close a credit card is your ability to make purchases on the card. You'll no longer have access to a credit limit and if you try to use your credit card, the transaction will be declined.

You're still responsible for making at least the minimum payment by the due date until the balance is paid in full. If you're late on your payment or you pay less than the minimum, you'll be hit with a late fee. Multiple late payments can result in your interest rate being raised to the penalty rate.

How to Reduce or Eliminate Interest Charges on a Closed Credit Card

There are a few ways you can use to reduce or possibly even eliminate the interest paid on a closed credit card account:

  • Transfer the remaining balance to another credit card. You could avoid paying interest by transferring your balance to a credit card with a zero percent interest rate. If you pay off the balance before the promotional period ends, you're good. You'll start paying interest on any balance left after the promotion expires.
  • Negotiate a lower interest rate before closing. A good payment history would normally make it easier to negotiate with your credit card issuer. However, it may not be as easy to get the credit card issuer to lower your rate once your account is closed. If you're thinking about closing your credit card but haven't already, consider asking for a lower interest rate before closing the card.
  • Pay more on your credit card. You can minimize the amount of interest you pay on your credit card, even without a lower interest rate or zero percent promotional rate, by reducing your balance quicker. The lower your balance, the lower your finance charge will be. The extra benefit of making larger payments is that your balance is paid off faster than if you paid the minimum only.

If you haven't closed your credit card yet and you're still exploring your options, consider waiting until your full balance is paid off. Closing a credit card won't help with paying off your credit card, since you'll still have interest to pay. However, closing your credit card while it still has a balance can negatively affect your credit score, making it difficult to qualify for other credit cards and loans.