There comes a time when you might want to close or cancel your credit card—whether because you have too many, aren’t using it, struggling with debt management, or have found better alternative credit cards, or any other reasons.
If you’re thinking of closing a credit card, there are a few important things to keep in mind. You need to avoid any negative effects on your credit score and make sure all your dues are paid before closing the card. Following the right steps is very important.
Let’s understand in detail!
Closing a credit card seems easy, but it's important to think about how it could affect your finances and credit score.
One major worry about closing a credit card is its effect on your CIBIL score. When you close a card, your total credit limit goes down. This can increase your credit utilization ratio, which is the percentage of credit you’re using compared to what you have available. A higher ratio can lower your score.
Important Note: If you close an old credit card, it could shorten your credit history. This is important because your credit history also affects your credit score.
Before canceling a credit card, make sure you pay off all your dues, including any EMIs linked to it. Not paying these amounts can cause to penalties, interest charges, and a lower credit score.
If you have reward points, cashback, or benefits like free flight tickets, be sure to use them before closing the card. Once you cancel the card, you won’t be able to access these perks anymore.
Make sure you have other payment options ready, like a debit card or another credit card, especially if you have recurring payments linked to the card you want to cancel.
Now that you've decided to close your credit card, and taken necessary steps such as clearing outstanding debt, redeeming your points, and other things. Here’s an easy step-by-step guide to help you do it smoothly.
Once you’ve cleared dues and redeemed rewards, the next step is to get in touch with your credit card provider’s customer care department. Most banks in India offer multiple channels for this:
Phone call: Call the bank’s credit card customer service helpline.
Email: Send a written request to the customer service email ID.
Branch visit: Visit your nearest branch to make a request in person.
Online portal: Banks allow you to submit a cancellation request through their online banking platform. It requires you to submit some information then you get an OTP, after this, you can select the credit card and close it.
When you contact customer care, give your credit card details and say you want to cancel the card. The bank might ask why, so be prepared to explain your reason, like high fees or not using the card.
Important: Always request a confirmation once your cancellation request is processed.
After your request is processed, the bank will send you a confirmation, usually by email or SMS, saying your credit card is canceled. Once you get this, make sure to cut your card into multiple pieces, especially the magnetic strip and chip, to prevent any misuse.
Once your credit card has been canceled, here are a few things you need to be aware of:
Final Statement: Even after your credit card is canceled, the bank may send a final statement showing any pending dues or refunds. It's important to check this statement for any mistakes.
Monitoring Your Credit Score: Keep an eye on your CIBIL score after canceling the card. If everything was done properly, like clearing dues and managing credit usage, your score shouldn't change much.
Ensure No Recurring Charges: After closing the card, check your bank account or linked accounts to make sure there are no unauthorized charges. If you see any, report them to the bank right away.
Closing a Card with a Large Credit Limit: If you cancel a card with a high credit limit, your credit utilization ratio will go up, which could hurt your credit score.
Not Checking for Pending Charges: Not clearing all pending charges before canceling can lead to penalties and interest that may be hard to fix later.
Cancelling Too Many Cards at Once: Closing several credit cards at the same time can greatly impact your credit score. If you plan to cancel more than one card, it's better to do it over a few months.
In conclusion, closing or canceling a credit card needs careful thought and planning. By knowing how it might affect your credit score, making sure all dues are paid, and being aware of any rewards, you can make a smart choice. Following the right steps and avoiding common mistakes will help you handle the process easily. Taking these precautions can protect your finances and make sure closing the card fits with your overall financial goals.
Yes, closing a credit card can impact your credit score, especially if it has a high credit limit. It may increase your credit utilization ratio, which can lower your score.
Before closing, ensure all dues are paid, check for any pending charges, and use any rewards or benefits linked to the card.
After you request to close the card, the bank will usually send you a confirmation via email or SMS. Make sure to keep this confirmation for your records.
Is it bad to close multiple credit cards at once?
Yes, closing several credit cards in a short period can significantly affect your credit score. It's better to space out cancellations over several months.
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