How to Close a Credit Card – Safely Cancel Without Credit Score Impact

Dev is a Developer by profession. He switched jobs, his new company gives him a 40% increment on his ₹80,000 salary. So, he wants to close his credit card and unlock a new one with more features.

Now that his income is ₹32,000 higher, Dev plans to close the existing credit card and get a new one that’s better for him. He is searching for cards that allow spending, offer cashback, and provide travel benefits. Because his salary has increased by 40%, he wants a new card that fits his new lifestyle.

Dev is delighted about this move since he will earn more, and the credit card will assist him in managing his finances. He should choose the card that has the most generous offer.

How Closing a Credit Card Affects Your Credit Score?

Dev, who is a developer, intends to close his old credit card. Before proceeding, he should weigh the possible effect on his credit score the moment he closes his credit card.

Key Ways Closing a Card Affects Credit Score

1. Credit Utilisation Ratio Goes Up

• What it means: This is how much credit you use compared to your total limit.
• Example:
• Dev has 2 cards:
• Card A: ₹50,000 limit, ₹10,000 balance
• Card B: ₹30,000 limit, ₹0 balance
• Total limit: ₹80,000
• Total balance: ₹10,000
• Utilization: (₹10,000 / ₹80,000) = 12.5% (Good)
• If Dev closes Card B:
• New limit: ₹50,000
• New utilization: (₹10,000 / ₹50,000) = 20% (Higher = Worse for score)

2. Credit History Length Shortens

• Older cards help your credit history.
• Closing an old card can reduce the average age of accounts.

3. Fewer Active Accounts

• Having multiple credit accounts shows lenders you can manage credit well.
• Closing a card reduces this mix.

Should Dev Close His Card?

Key Takeaways

• Closing a card can hurt Dev’s credit score.
• Best to keep old cards open if possible.
• Pay off balances first before closing.

Steps to Close a Credit Card Properly

A developer in the development field is interested in closing any unused credit cards. Now let’s examine the correct steps for closing his idle credit card:

Step 1: Pay Off the Full Balance

• Check the card’s current balance.
• Pay any remaining dues before closing.
• Example: Dev’s card has a ₹5,000 balance. He pays it off first.

Step 2: Redeem Rewards & Cashback

• Use leftover points, miles, or cashback.
• Example: Dev has 2,000 reward points. He redeems them for Amazon vouchers.

Step 3: Call Customer Care

• Dial the number on the back of the card.
• Say: "I want to close my card ending with XXXX."
• Example: Dev calls his bank and confirms closure.

Step 4: Get Written Confirmation

• Ask for an email or letter stating:
• The account is closed.
• No balance is left.
• Example: Dev saves the bank’s closure confirmation email.

Step 5: Cut & Dispose of the Card

• Shred or cut the card (with scissors).
• Example: Dev cuts his card into pieces before throwing it.

Step 6: Check Credit Report After 30 Days

• Verify the card is marked "Closed by Customer" on his report.
• Example: Dev checks his report on CIBIL or Experian.

Should Dev Close His Card?

Key Takeaways

• Always clear dues first.
• Get written proof of closure.
• Check your credit report later.

Alternatives to Closing a Credit Card

As a developer, Dev is considering closing his credit card, but he will consider better options as a way out before making decisions. Here are some smart alternatives:

1. Downgrade to a No-Fee Card

• Ask the bank to switch to a free version of the card.
• Keeps credit history intact.
• Example: Dev changes his ₹2,000 annual fee card to a zero-fee card from the same bank.

2. Keep It Open with Minimal Use

• Make one small purchase every 3-6 months (like a Netflix subscription).
• Prevents the bank from closing it due to inactivity.
• Example: Dev buys a ₹99 mobile recharge every few months.

3. Negotiate Fee Waivers

• Call customer care and ask to remove the annual fee.
• Works if you have a good payment history.
• Example: Dev requests a fee waiver, and the bank agrees.

4. Use It for Small Automatic Bills

• Set up automatic payments for small, fixed expenses.
• Keeps the card active without effort.
• Example: Dev links his card to his Spotify Premium payment.

Which Option is best for Dev?

Key Takeaways

• Downgrading is better than closing.
• Small, regular usage keeps the card active.
• Always ask for fee waivers first.

Dev can keep his credit score healthy while avoiding unnecessary fees!

Reasons to Close a Credit Card

Developer Dev is considering the decision of terminating his credit card. Curtailed use of a credit card may be warranted in several common situations:

1. High Annual Fees

• The card charges more fees than the benefits it provides.
• Example: Dev's card has a ₹5,000 annual fee, but he rarely uses the rewards.

2. Too Much Temptation to Spend

• The card makes it too easy to overspend.
• Example: Dev finds himself making impulsive purchases with this card.

3. Poor Customer Service

• The bank provides poor support or has too many issues.
• Example: Dev faces long hold times and unresolved complaints.

4. Found a Better Card

• Another card offers better rewards or lower fees.
• Example: Dev got a new card with 5% cash back instead of his current 2%.

5. Divorce or Separation

• Need to close joint accounts after splitting.
• Example: Dev and his ex-partner shared this credit card.

Conclusion

The developer, Dev, has thought very carefully about all the consequences of closing his credit card. It hits him hard that closing his card with high fees and benefits is a good idea, but he must bear in mind the impact on his credit score. First, he will repay the outstanding entire balance. Then, he’ll contact his bank to formally close the account and receive proof in writing. 

Dev understands that by continuing to use his older, no-fee card, possibly in some regular but minor purchases, he will be doing a wiser thing when protecting his credit score. To guarantee that he is satisfied with the decision, he will consider alternatives such as fee concessions or account alterations before making the decision. 

FAQs

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

Yes, it can lower your score because it reduces your total available credit and may shorten your credit history. If it's your oldest card or you have high balances on other cards, the impact could be bigger.

2. How do I close a credit card properly?

First, pay off the full balance. Then call your bank's customer service or visit a branch to request closure. Get written confirmation that the account is closed with a 0 balance.

3. Should I close a credit card with a zero balance?

If the card has no annual fee, it's often better to keep it open to help your credit score. Just use it lightly every few months to keep it active.

4. Can I reopen a closed credit card later?

Sometimes, but not always. Some banks allow you to reopen an account within 30-60 days, but policies vary. Ask your bank before closing.

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

Most banks cancel unused points or cashback when you close the account. Always redeem rewards before closing the card.

6. How long does a closed card stay on my credit report?

Closed accounts in good standing stay for about 10 years, helping your credit history. Negative marks stay for 7 years.

7. Is it bad to close multiple credit cards at once?

Yes, closing several cards quickly can hurt your credit score by drastically reducing your available credit. Close 

one at a time if possible.

8. Should I close a card before applying for a loan?

No, it's better to wait until after getting the loan. Closing a card can increase your credit utilization and lower your score temporarily.

9. What’s better, closing a card or leaving it unused?

If there's no fee, keeping it open (with occasional small purchases) is usually better for your credit score than closing it.

10. Can I close a credit card online?

Some banks let you close accounts online, but others require a phone call. Check your bank’s website or app for instructions.

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LoansJagat Team

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