Closing a Credit Card might seem like a simple task, but there are a lot of things to think about before you actually do it. Many people close their credit cards to cut down on spending, avoid annual fees, or because they no longer need them. However, making a quick decision without proper planning can lead to some unwanted surprises. In this article, we'll take a detailed look at what you should be careful about while closing a credit card to make sure everything goes smoothly.
1. Make Sure Your Credit Card Is Really Closed
One of the most common mistakes people make when closing a credit card is assuming that the card is closed as soon as they request it. Just because you've asked your bank to close the card doesn’t mean it's actually closed. Sometimes, the bank might take longer to process the request, or they might leave the account open.
What you need to do to be sure your card is really closed:
- Follow up: After you request the closure, follow up with the bank or credit card company a few days later to check the status.
- Ask for confirmation: Always ask for a written confirmation that your credit card has been closed. This could be a letter, an email, or a message from the bank.
- Check your online account: Log into your credit card account online or through the bank's mobile app to see if the status has been updated to "closed."
2. Pay Off All the Outstanding Dues on Your Credit Card
It’s very important to pay off any outstanding dues on your credit card before you close it. If there’s any balance left on the card, even a small amount, it could lead to extra charges or interest fees, which will only make things complicated.
Steps to take before closing the card:
- Clear your dues: Make sure you pay all the money you owe on the credit card, including any small charges you might have forgotten about.
- Check for pending EMIs: If you have set up any EMI (Equated Monthly Installments) plans on your credit card, try to clear them before closing the card.
- Confirm your payments: Double-check that all your payments have gone through successfully and that there is no remaining balance.
3. Double-Check the Credit Card Balance After Payment
Even after you pay your bill, it’s a good idea to check your credit card balance again. Sometimes, small fees or interest charges can appear on your statement after you think you’ve cleared everything.
How to ensure your balance is zero:
- Check your account: Log in to your credit card account online or on the bank’s app to check the latest statement.
- Ask the bank: Call the bank's customer service to confirm that your card balance is truly zero before you proceed.
- Wait for the next statement: It’s a good idea to wait for one more billing cycle to see if any new charges appear.
4. Redeem All Your Reward Points Before Closing
One of the biggest mistakes people make when closing a credit card is forgetting about their reward points. Many credit cards offer points, cashback, or discounts for using the card, and these benefits usually disappear once the card is closed.
Getting the best use of your credit card Reward points:
- Check your reward points: Log into your credit card account and see how many reward points you have accumulated.
- Redeem your points: Try to use your points for something valuable like shopping vouchers, discounts on travel, or as cashback against your bill.
- Don’t waste your points: Remember, once the card is closed, you will lose all those points, so make sure to use them before you go ahead with the closure.
5. Confirm the Credit Card Closure with the Bank
After you request the closure of your credit card, it’s crucial to follow up with your bank or credit card provider to make sure that your request has been processed properly. Banks sometimes delay or fail to close credit card accounts, which can lead to issues later on.
Steps to confirm your credit card is closed:
- Contact customer service: Call the customer care number or send an email to your credit card provider to check on the status of your closure request.
- Get it in writing: Always ask for a written confirmation or closure letter from the bank stating that your credit card has been successfully closed.
- Keep records: Save copies of any communication with the bank, including emails, letters, and any messages you receive about the closure.
6. Save the Customer Care Number or Email Address
You might need to contact your bank or credit card provider several times during the closure process, so it’s a good idea to keep their customer care contact details handy.
How to find the contact information:
- Visit the bank’s website: Go to the official website of your bank or credit card provider and find the customer service number or email address.
- Keep the details handy: Write down the contact details or save them on your phone for quick access.
- Use official contacts: Always use the official customer care numbers to avoid any fraud or miscommunication.
7. Think Twice About Whether You Should Close the Credit
Card
Closing a credit card is a big decision, and it’s important to ask yourself if you really need to do it. There are times when keeping a credit card open might actually help your financial situation.
Reasons to reconsider closing your card:
- Annual fees: If your credit card doesn’t have any annual fees, keeping it open won’t cost you anything.
- Credit utilization ratio: Keeping a credit card with zero balance can help improve your credit utilization ratio, which can boost your credit score.
- Emergency use: It’s always good to have a credit card available for emergencies, even if you don’t use it often.
8. Think About Future Needs for a Credit Card
Will you need a credit card in the future? This is an important question to think about before closing your current credit card. If you close a card now, it might be harder to get a new one later on, especially if your financial situation changes.
Things to consider before closing your card:
- Future loans: If you’re planning to take a loan, like a home or car loan, having a credit card can sometimes help you get better rates.
- Credit score: Closing a card could affect your credit score, which might make it difficult to get a new card or loan later.
- Financial stability: Consider your current financial situation and ask yourself if having a credit card might be useful for managing emergencies or large expenses.
9. Impact of Closing a Credit Card on Your Credit Score
Closing a credit card can affect your credit score in different ways. It might not be a huge impact if you have a strong credit history, but it’s still something to think about.
How closing a credit card affects your credit score:
- Credit utilization ratio: When you close a credit card, your available credit decreases, which can increase your credit utilization ratio (the amount of credit you’re using compared to your total credit limit). A higher ratio can lower your score.
- Length of credit history: If the card you’re closing is one that you’ve had for a long time, it can reduce the average age of your credit accounts, which may negatively impact your score.
- Mixed credit accounts: Lenders look for a combination of credit types. Closing a credit card can reduce this mix, which might slightly lower your credit score.
Final Thoughts
Closing a Credit Card isn’t as easy as just cutting it up and throwing it away. There’s a process involved, and you need to think it through carefully. Make sure you’ve cleared all your dues, checked your balance, and redeemed your reward points. Always confirm the closure with your bank, get it in writing, and think about how closing the card might impact your credit score and future financial plans.
Remember, having a credit card can be a great financial tool if you use it wisely. It can help you in emergencies, improve your credit score, and provide you with benefits like rewards and cashback. If you decide to close the card, do it with a clear plan and full understanding of the consequences. If you’re unsure, don’t hesitate to contact your bank’s customer service for guidance.
