Having a Credit Card is a necessity today, given the benefits it offers. Some of the advantages include the ability to pay for purchases or services without ready cash, an easy and convenient way of transacting, the ability to repay as per your convenience, and so on.
But there could an occasion when you may want to close your Credit Card. It could be to simplify your financial portfolio, cut down on fees, or adjust your expenditure patterns. This comprehensive guide explains how to close Credit Card accounts, ensuring your financial journey remains as smooth and secure as possible.
8 steps to permanently cancel Credit Cards
The process to cancel Credit Cards can be straightforward when you know the right steps to follow. Here's a concise guide to help you permanently close your Credit Card in a hassle-free and informed manner.
1. Evaluate financial needs: Before you embark on the journey to close your Credit Card, assess your overall financial situation. Understanding whether you want to cancel a Credit Card due to the high fees, interest rates, or a shift in spending patterns is crucial.
2. Redeem rewards and benefits: If your card offers rewards, ensure you redeem all the accumulated points. This step is vital before you start the process to deactivate your Credit Card, as unredeemed rewards are typically forfeited upon closure.
3. Settle outstanding dues: Clear any remaining balance on your card. If you are looking at closing unused Credit Cards, you may not have pending dues. But otherwise, ensure that you repay your Credit Card outstanding in full before you start the process to close your Credit Card. Axis Bank provides easy online payment options for settling your Credit Card dues.
4. Contact customer support: Get in touch with your bank’s customer service team to initiate the termination of your credit card account. This contact is a key step in the Credit Card closure process.
5. Send a formal closure request: Draft a Credit Card account closure letter. Include essential details like your name, address, and the last four digits of your card number. Mention explicitly your request to shut down the Credit Card.
6. Obtain closure confirmation: Always ask for a written confirmation of your Credit Card account shutdown. This document is crucial for your financial records.
7. Safely dispose of your card: Once your Credit Card account termination request is confirmed, physically destroy the card to prevent any potential fraudulent use.
8. Monitor credit score changes: It's prudent to monitor your credit score frequently following the closure of your credit card. This helps you understand how closing a Credit Card affects your financial health.
Common reasons to cancel a Credit Card
Choosing to deactivate a Credit Card comes down to various personal and financial factors. Here are some key reasons people often decide to cancel their cards:
1. High fees or interest rates: If a card's fees or interest rates are excessively high, deactivating it can be a financially sound decision.
2. Simplifying financial management: Reducing the number of credit cards can streamline personal finances, leading to the deactivation of less-used or beneficial cards.
3. Curbing overspending: To manage budgets better and avoid debt, deactivating a Credit Card can be a proactive step.
4. Changing spending habits: Shifts in financial situations or lifestyle changes can make certain cards redundant, prompting deactivation.
5. Seeking better rewards: Transitioning to Credit Cards with more advantageous rewards or lower rates can lead to the deactivation of older, less efficient cards.
6. Security and fraud concerns: In response to security breaches or fraud incidents, deactivating a Credit Card can safeguard financial information.
7. Credit score optimization: Some individuals deactivate cards as part of a strategy to improve or maintain their credit score.
8. Non-usage: Deactivating unused Credit Cards, especially those incurring annual fees, can simplify financial management.
9. Financial upgradation: An improvement in financial status might make some Credit Cards unnecessary, leading to their deactivation.
10. Consolidating debt: Deactivating a Credit Card may follow debt consolidation efforts to prevent the accumulation of additional debt.
Also Read: Is it a good idea to close your credit card?
Things to consider while closing a Credit Card
Some of the factors you should look into before finally deciding to close your Credit Card include:
- How long you have had it - The history of the Credit Card impacts your credit score and credit history. If you have had the card for a long time and have been repaying your dues regularly, then it may be considered as a sign of responsible credit behavior. So, it may be better to keep your credit card open.
- Credit utilization ratio - If you cancel your Credit Card, your credit utilization ratio may come down, and this may in turn impact your credit score. The credit utilization ratio is the difference between the total credit limit on your Credit Card and the amount of credit you have utilized. Closing a Credit Card means the total credit limit will decline and so your credit utilization ratio may also reduce.
- Payments linked to your Credit Card – Check if you have any automatic payments linked to your Credit Card. If so, ensure you change the payments before you close your Credit Card.
Does cancelling a Credit Card hurt your credit score?
Yes, cancelling a Credit Card can affect your credit score. This happens primarily because it impacts your credit utilisation ratio and may alter the average age of your credit accounts. Understanding the consequences of closing a Credit Card is essential in making an informed decision.
How to close a Credit Card without hurting your Credit Score
1. Gradual closure of accounts: If you're managing multiple Credit Cards, consider spacing out the closures instead of cancelling all at once. This approach helps maintain your credit health and avoids the potential risks of deactivating Credit Cards quickly.
2. Preserve older accounts: The age of your credit history is a vital factor in your credit score. Therefore, it might be wise to keep older accounts open and active, as closing them could inadvertently impact your credit history.
3. Lower your credit utilisation ratio: Before you deactivate a Credit Card, aim to lower your credit utilisation ratio by paying off balances on other cards. This step is crucial in maintaining a healthy credit score, especially in the context of closing an account.
4. Be mindful of the Debt-to-Credit ratio: Ensure that the termination of any Credit Card account does not significantly skew your overall debt-to-credit ratio. A well-balanced ratio is key to a strong credit profile.
5. Regular credit report checks: Following the deactivation of a credit card, it’s important to review your credit report regularly. This practice helps in monitoring any changes or anomalies that might occur post-closure, ensuring that your credit health remains intact.
Conclusion
Deciding to deactivate a Credit Card is a significant financial step, influenced by a variety of personal and economic reasons. Whether it's due to high fees, a desire to simplify finances, or a shift in spending habits, each reason holds substantial weight in your financial journey. It's essential to consider the implications on your credit score and overall financial health.
For those holding an Axis Bank Credit Card or considering one, remember that Axis Bank offers comprehensive support and guidance through this process. Their range of Credit Cards caters to diverse needs, ensuring that your financial tools align with your evolving lifestyle and goals. Deactivating a Credit Card, when done thoughtfully, can be a positive step towards financial clarity and control.
Frequently Asked Questions
Does closing a Credit Card hurt your credit score?
Closing a Credit Card may hurt your credit score because your overall credit limit will reduce and that will impact your credit utilization ratio.
Can I close my Credit Card online?
Some banks offer the option to close Credit Cards online. Check if your bank offers the option. If it does, go to your bank’s website and submit the request to close the Credit Card. You will get an OTP to authenticate your request and your request to close your Credit Card will be accepted.
Is there a penalty to closing a Credit Card?
If you have any overdue on your Credit Card balance then you may need to pay a penalty before you close your Credit Card.
What is the disadvantage of closing a Credit Card?
Your overall credit score may reduce and this may impact your credit utilization ratio.
How long will it take to cancel your Credit Card?
It may take a few days after you submit the request to close your Credit Card for the card to get cancelled.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
