Friday, May 18, 2018

How to close your credit card

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Having too many credit cards can make it difficult to keep track of payments due, annual maintenance and due dates. To avoid hassles and prevent the misuse of unused credit cards, it makes sense to close them. This involves following a formal closure procedure to notify the credit card company or bank. Here is how to go about it. 

Eligibility 
First, it is important to pay off all outstanding dues to the credit card company. Any spends on the card after the billing cycle should also be paid off in advance so that no dues are generated. 

Closure form 
Fill a credit card closure form as prescribed by the credit card company, mentioning the name of the card holder, credit card number, and reason for closure. The bank account number, which was linked for auto-payments of card dues, should also be mentioned for delinking. If there is a loan outstanding on the credit card, it will be pre-closed, which might attract a penalty. 

Closure confirmation 
On receipt of the request, once you clear the dues, the credit card company will close the card and inform you about the same. 

Destruction of card

Once you receive the confirmation of the closure, you should destroy the card by cutting it into tiny pieces. 

Effect on credit score 
Closing a long standing credit card may have a negative impact on your credit score since the average holding period for cards held reduces on cancellation. So it makes sense to not close a card just before applying for a new loan. 


1. If the card was issued based on a lien on a fixed deposit, the lien will be removed once all card dues are cleared. 
2. It is best to redeem all reward points associated with the card before cancellation.


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