How to Close Or Cancel Credit Card

Managing your credit cards responsibly is crucial for maintaining a healthy financial life. Sometimes, closing or cancelling a credit card becomes necessary, whether to avoid temptation, cut down on annual fees, or streamline your finances. Here’s a comprehensive guide to help you through the process.

Struggling with too many credit cards for your daily expenses? Just get an Airtel Axis Bank Credit Card from Airtel Finance, and save up to ₹16,000 every year! The lowest processing fees, low interest charges and more. Download the Airtel Thanks app to apply now!

Understanding the Implications

Before deciding to close or cancel a credit card, it’s important to understand the potential implications on your credit score. The credit utilisation ratio and the length of your credit history are significant factors that can be affected.

Impact on Credit Utilisation

Your credit utilisation ratio is the amount of credit you’re using compared to your total available credit. Cancelling a card reduces your available credit, which can increase your utilisation ratio and potentially lower your credit score. Aim to keep your utilisation below 30% for optimal credit health.

Length of Credit History

The length of your credit history accounts for 15% of your credit score. Closing an older account can shorten your credit history and negatively impact your score. Consider keeping older accounts open, especially if they have no annual fee.

Read more: Ways to check your credit score online

Steps to Close or Cancel a Credit Card

If you’ve weighed the implications and decided to proceed, follow these steps to close or cancel your credit card properly.

1. Pay Off the Balance

Before closing your credit card, ensure that the balance is paid off in full. This includes any pending transactions, interest, and fees. If your card has a balance transfer or promotional rate, make sure you understand any implications of early closure.

2. Redeem Rewards

If your card offers rewards, redeem them before cancelling. Unused points, miles, or cash back can be forfeited once the account is closed. Check the rewards program terms to maximise your benefits.

3. Contact Customer Service

Call the customer service number on the back of your card. Inform the representative of your decision to close the account. Be prepared to provide a reason for your request; some issuers may offer incentives to keep your account open.

4. Confirm the Closure in Writing

Request a written confirmation of your account closure. This serves as proof that you initiated the closure and can be useful if there are any disputes or issues later. Send a follow-up letter to the issuer’s customer service address, reiterating your request and retaining a copy for your records.

5. Monitor Your Credit Report

After closing your card, monitor your credit report to ensure the account is reported as “closed by consumer” and not “closed by creditor.” This distinction is important for maintaining a positive credit profile. You’re entitled to a free credit report annually from each of the three major credit bureaus: Experian, Equifax, and TransUnion.

Read more: How to get a credit card without a CIBIL score?

Special Considerations

Some situations may require special consideration when closing or cancelling a credit card.

Annual Fees

If your card charges an annual fee, consider timing the closure before the fee is due. If you’ve already been charged, ask if a pro-rated refund is possible. Some issuers may accommodate such requests.

Joint Accounts

For joint accounts, both cardholders must agree to the closure. Contact the issuer to understand the process and ensure both parties are informed and in agreement.

Secured Credit Cards

With secured credit cards, you must close the account to get your security deposit back. Pay off the balance, and follow the issuer’s procedures for closure. Ensure you receive your deposit promptly.

Read more: How long does it take to improve your credit score?

Frequently Asked Questions (FAQs)

1. Will closing a credit card hurt my credit score?

Closing a credit card can potentially hurt your credit score by increasing your credit utilisation ratio and shortening your credit history. However, the impact varies based on your overall credit profile and the number of cards you have.

2. Can I close a credit card with a balance?

It’s best to pay off the balance before closing the card. Some issuers allow closure with a balance, but you’ll still be responsible for payments until it’s paid off. This can be more complicated and may incur additional fees.

3. What happens to my rewards when I close a credit card?

Unused rewards are typically forfeited when you close a credit card. Redeem all rewards before initiating the closure process to avoid losing them.

4. Can I reopen a closed credit card account?

Reopening a closed account is generally at the issuer’s discretion. Some may allow it within a certain timeframe, while others do not. Contact your issuer to inquire about their specific policy.

5. Should I close a credit card if I don’t use it?

If a card has no annual fee and you manage it responsibly, it might be beneficial to keep it open to maintain your credit history and utilisation ratio. However, if it poses a temptation to overspend, closing it might be a better option.

Closing or cancelling a credit card requires careful consideration and a strategic approach. By understanding the potential impacts and following the proper steps, you can make an informed decision that supports your financial well-being.