There may be various reasons for you to close your credit card: you have multiple credit cards, your credit card issuer increased your annual fees or interest rate, you are unhappy with the service or simply, you do not want to use that credit card anymore. Keeping your credit cards open is genuinely best for credit, but if you have made up your mind to close a credit card, here are the correct ways to do it.
Pay off your credit card’s outstanding dues:
You will not be able to close your credit card till you pay off your dues. You must immediately pay the bank the total outstanding balance on the account. This involves all amounts due to the bank under the agreement, including other amounts and transactions not yet charged to the account. The credit card will not be considered closed until you have paid all such due amounts.
Exhaust your credit card rewards:
Closure of credit card might entail withdrawal of all facilities that are provided through utilization of credit card or credit card number. Therefore, before closing your card, you must check your reward balance and see how many outstanding reward points are there. Also, remember that few cards allow you to utilize the reward points to pay off your credit card bills.
Make a written closure request:
You can terminate the agreement any time by a written notice to the bank accompanied by the return of the credit card and any added credit cards cut into several pieces through magnetic stripe and full clearance of all outstanding dues. Termination will be only effective after the receipt of the cut credit cards and payments of all the outstanding dues are made to the credit card account. No joining, annual or renewal fees will be refunded on pro rata basis.
Check to be sure your credit card account is closed:
In a month or two, you must check your credit report to be sure that the credit card is reported as closed. Your credit report reveals details of all credit accounts held currently and in the recent. Your credit card must reflect as closed in your credit report. In case it doesn’t, get in touch with the bureau and the bank to correct it.
One key aspect that you must consider before closing a credit card is that after closure, your total credit limit automatically will come down, which may result in a higher credit utilization ratio - the proportion of credit being used by you against the total credit available. A higher credit utilization ratio usually brings down your credit score. You may approach another bank for a new credit card or request a current one to increase the credit limit on another card you may have.
– Sahil Arora – Head, Payment Products, Paisabazaar.com
