While cancelling a credit card can be done by either calling the customer care or putting an online request, there are certain factors one should consider before closing the credit card.
New Delhi: Credit cards have become extremely common among the urban population. They serve as one of the key financial instruments for users to manage day-to-day expenses. In recent times, credit cards have become one of the most common methods of payment in urban areas. One of the benefits of credit cards is that it enables you to pay for all kinds of purchases offline as well as online.
With credit cards becoming readily available and many people own multiple credit cards from various banks. Having multiple credit cards allow people to access a range of benefits along with a higher, overall spending limit. However, there are instances when users may consider closing or cancelling it. One can cancel their credit card by either calling the customer care or putting an online request
Do these things before closing your credit card:
1. Move the standing instructions: A standing order mandate is when the cardholder instructs the bank to make regular payments from their account. These payments may be for online subscriptions, EMIs, or even utility bill payments. Before closing a credit card, all such instructions need to be cancelled or moved. Before you close your card, move any standing instruction on the credit card to another credit card or bank account. Failing to do so may lead to non-payment or delay in payments of online subscriptions, insurance premiums, or utility bills.
2. Repay the amount: When you are closing your credit card, make sure there are no dues on your credit card account. You cannot close a credit card account with pending charges. In case you have any pending charges, they will attract interest and late payment penalties and will spoil your credit score. If there are existing EMIs/loans on the credit card, you should repay the outstanding amount and the additional charges in one go before closing the card.
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3. Consider Credit Utilisation Ratio: One of the consequences of closing a credit card is that your Credit Utilisation Ratio (CUR) increases. For those who are not aware, CUR is the percentage of available credit you’re spending. A high CUR harms your credit score. If you have two cards with spending limits of Rs 1 lakh each, you get a total limit of Rs 2 lakh.
If you spend Rs 25,000 per card each month, you’re spending a total of Rs 50,000 out of Rs 2 lakh, or 25% of your total limit. In case you close one card and spend Rs 50,000 on the remaining card. Your CUR will be pushed up to 50%, which should ideally be in the 20-30% range. So before closing your credit card account, remember to do this.
4. Redeem reward points: Before closing any credit card account, do not forget to redeem your pending reward points. Most credit card companies offer reward points on transactions done through credit card which can be redeemed for cashback, discounts, coupons, products or services through your bank’s marketing partners. Before you close your card, ensure you have redeemed all your points. You can visit the bank website and rewards catalogue to choose the products or services to purchase in exchange for your accumulated reward points.
5. Follow up: As a credit cardholder, you need to know that banks and their staff have a lot of duties and often loaded with work which leads to them getting to some requests late. Because of this, so your request to cancel your credit card may not be carried out in real-time which is why it is important for you to follow up with the bank. Contact your bank and make sure that the credit card has been cancelled by the bank and no transactions are being carried out with the card. Do not forget to collect your no-dues certificate from the bank.
