Closing your credit card is perhaps not something that you may consider at the time of taking one. Yet, it is an important aspect which you must understand about being the owner of a credit card.
Closure of a credit card may have some unintended consequences for you. So, before you take one, it is vital that you understand how to close SBI credit card or another credit card. Today, credit cards have become a common method for making payments.
Using a credit card, you can make an online as well as offline purchase. Additionally, it comes with a host of benefits, which can make it a pleasure to spend your money. It is common for credit card users to own more than one card at a time.
More number of cards means greater benefits and increased cap on the spending limit. However, over time, owning multiple cards can turn into a challenge for some people. The financial burden of maintaining multiple cards may force them to consider giving up one or more credit card.
As opposed to the common notion, simply tossing a credit card in one corner and forgetting all about it is not the right way to do this. There is a process involved in closing a credit card. Moreover, there are consequences attached to the closure of a credit card, which must be understood before proceeding down this road.
What Are The Consequences Of Closing A Credit Card?
Closing your credit card will entail certain financial repercussions.
Change In Credit Utilisation Ratio
The credit utilisation ratio is a percentage of available credit and your spending. Whereas a higher credit utilisation ratio can harm your credit score, it also tends to increase the rate of interest which you may be liable to pay on your credit sources.
Closing a credit card would mean reducing your available credit limit. So, now you would be making close to the same expenses as before but with lesser credit availability. This, in turn, raises your credit utilisation ratio.
Unless you ask the bank to increase your credit limit, or make adjustments to your expenses, the situation cannot be rectified.
Fall In Credit Account Ages
While computing your credit score, the age of your credit account has a major role to play. With the passage of time, the impact on your contribution to your credit score increases. As an older credit borrower, you come forward as a responsible and creditworthy person.
Closing such line of credit, which you have owned for many years now, certainly plays a role to impact your credit score. In contrast, losing a credit card which you borrowed only recently may not be as disadvantageous to your credit score. Unless there is an outright major issue with your card, consider talking to your card provider to sort it out.
The Process Of Closing Your Credit Card
Redeem Pending Points
If you have made up your mind to close your credit card, consider checking if you have any pending reward points in your account. Owning a credit card certainly brings you the benefit of various deals, discounts, cashback offers and more.
It is advisable to visit the offer catalogue on your card company page and check how you can benefit. There are many cards which offer some of the best rewards credit card India. If you are the owner of one, make sure that you are receiving the benefits of the same.
Clear Dues
It can be quite tempting to stop using your credit card one fine day and never look back on its face.
However, did you know that if you leave any dues on your card, you will have to bear additional charges on late payment and interest on that amount? In any case, do not leave a pending balance on your card.
Remove Standing Instructions
It is common for people to allow the bank to make automatic payments on certain monthly dues.
Make sure to revoke such standing instructions before you close your credit card. Failure to do so may invite more charges on your credit card while you are still trying to clear past charges on your card.
Contact The Bank
After going through the steps above, you can begin the process of closing your credit card by contacting your bank.
You will need to notify the bank about the completion of the steps above. Since they can guide you instantly and seamlessly to close the account, the process will be complete in no time.
Always Follow Up
Your request to cancel your credit card may be lost or misplaced due to fault at the bank’s end. Incidentally, it may so happen that your credit card may not be closed while you are hoping it to be. It is always a good idea to follow up with your bank and enquire if the same has been done.
To make things formal, you can collect your no dues certificate from the bank. This should be in addition to a written confirmation that your credit card account has been closed. Thus, even if a discrepancy arises at a later date, you will have a complete proof that you had completed all the steps at your end.
It is always a good idea to have written proof rather than relying on oral assurances from the bank. Today, you can access various banking channels through online as well as offline modes. So, you will be able to place a request for closure of your credit card through multiple modes.
These include the mail, phone, banking app or even by visiting the branch of the bank.
In Conclusion
These are some of the vital steps involved in closing your credit card account formally and correctly. Failure to follow one or more steps may allow problems to arise, for you as well as for your credit card company.
Thus, it is important to check that your credit card is up for closure the right way. Most people go about this process the wrong way and ultimately come to bear the harsh consequences of doing it.