How to Close a Credit Card: A Step-by-Step Guide

Do you know as of June 2024, 1.8% of people in India had defaulted on their credit card payments, according to TransUnion Cibil.

Closing a credit card may seem like a grand gesture, but sometimes it must be done.

If you’re looking to keep your finances less complicated, escape annual fees, or upgrade to a superior credit card, knowing how to close a credit card properly is essential. 

Take a look below at a brief guide to take you through it step by step. Don’t worry – we’ll guide you through it slowly!

The Right Way to Close a Credit Card

Closing a credit card may seem like a simple task, though, since the process could adversely affect your credit score and your finances in the long run. Here is the step-by-step guide to the proper means to close out your credit card:

• Pay Off Your Balance – When closing your credit card, ensure to settle any outstanding balance in total. If you leave any unpaid debt, there will be more interest charges accruing, and you could end up with late fees or penalties.
• Cash Any Rewards – In case your card has rewards, points, or cashback benefits, cash any rewards before card closure. Closing the card makes you lose the unused rewards. 
• Call Your Card Issuer – Call your card issuer’s customer service number and ask to have the account closed. Be firm and polite, and ensure that they put your card closure in writing. Ask for any appropriate information regarding the closure, such as if there are balances or fees outstanding.
• Check for Pending Transactions – Make sure there are no outstanding transactions or subscriptions associated with the card. This will prevent any surprises after the card is closed.
• Check Your Credit Report – Closing a credit card can have an effect on your credit score. Your credit utilization ratio might rise, and this will have an impact on your score. Watch your credit report after closing the card to see what changes.
• Destroy Your Card – After the card is officially closed, make sure to destroy it by shredding it to protect your personal information.

Ways to close/cancel a credit card

Over customer care 

• To cancel a credit card, dial the customer care division of your bank.
• They will acknowledge and offer further advice on how to go ahead.

Through written notice 

• To initiate closure procedures, write to the credit card issuing company requesting the cancellation with complete credit card details.

Through mail 

• A few banks provide facilities to cancel a credit card through email.
• Ensure that your e-mail has a cancellation request, credit card details, and personal details.

Online request

• According to the bank, it is possible to close an account online.
• Log into the bank website, complete the necessary fields, and submit the request.

Avoid these mistakes when closing your credit card

Closing a credit card is a serious decision, and it’s important to do it the right way to avoid negative effects on your finances or credit rating. Below are some of the most common mistakes people make when closing their credit cards and how to avoid them.

• Not Paying Off the Balance: Always pay off your balance prior to closing the card to prevent ongoing interest and fees.
• Forgetting to Redeem Rewards: Redeem any rewards or points prior to closing, or they will be lost.
• Ignoring Automatic Payments: Be sure to change any automatic bill payments or subscriptions associated with the card to prevent missed payments.
• Closing an Old Account: Never close your oldest card since this can hurt your credit score by lowering the average age of your credit accounts.
• Not Getting Written Confirmation: Request written confirmation of the card closing to prevent future problems.
• Ignoring Fees: Consider any fees (such as annual or closing fees) prior to closing the account.
• Not Monitoring Your Credit: Check your credit report after closing the card to ensure no negative impacts.
• Not Considering Alternatives: If you’re closing the card due to fees, consider downgrading to a no-fee version instead.

Conclusion

Closing a credit card is a move that must be properly planned to prevent unwanted financial adversities. With the correct procedure—paying off your balance, cashing in rewards, ensuring all pending transactions are settled, and checking your credit report—you can safeguard your finances and reduce the harm to your credit score. Refrain from usual errors such as not cashing in rewards or closing your oldest account, which have lasting effects. Keep in mind, that closing a credit card does not have to be that difficult if done properly. In case you are unclear, you might downsize to a no-fee alternative to streamline your finances without the negative repercussions.