Many of us in India have multiple credit cards, but let's be honest—some of them just sit in our wallets gathering dust. You might be wondering: Should I close my unused credit card? While it may seem like a simple decision, it can have both positive and negative effects on your financial health. So, before you cut up that card, let’s go through the pros and cons.
Some credit cards charge high annual fees even if you barely use them. If you're paying for a card that doesn’t give you any benefits, shutting it down could save you money.
A credit card that you don’t check often is more vulnerable to fraud. If someone hacks into it and starts spending, you might not even notice until it’s too late.
Keeping track of multiple cards—due dates, limits, and statements—can be a hassle. Closing an unused card means one less thing to worry about.
Having multiple credit cards makes it easier to swipe without thinking. If you're trying to be more financially disciplined, reducing the number of cards can help.
Your credit score depends on factors like your credit history and utilization ratio (how much credit you use versus how much is available). Closing a card reduces your total credit limit, which can make your utilization ratio look worse and lower your score.
The longer you have a credit card, the better it is for your credit history. If the card you're closing is one of your oldest, you might lose this benefit.
Keeping an extra card means you have a backup source of funds in case of an emergency. Closing it could reduce your options when you need quick financial help.
Banks check your credit history when you apply for loans—whether it’s for a home, car, or personal loan. A sudden drop in your credit score due to closing a card might make it harder to get a loan at a good interest rate.
If it’s your oldest credit card, think twice before closing it. A long credit history helps boost your credit score.
Make sure you’ve paid off any pending amount before requesting a closure. Otherwise, you could end up with penalties and a dip in your credit score.
If your card has cashback, travel miles, or reward points, redeem them before closing the account. You don’t want to waste those benefits!
Before closing a card, try to pay off balances on your other cards to keep your credit utilization ratio in check.
In India, you usually need to submit a written request or apply online to close a credit card. Always ask for a written confirmation from the bank so there’s no confusion later.
If you’re worried about annual fees, ask your bank if they can downgrade your card to a no-fee option.
Instead of closing it, use the card occasionally for small transactions and pay off the bill in full.
If you're worried about overspending, you can request the bank to lower your credit limit instead of closing the card.
Closing an unused credit card isn’t always a bad idea, but it’s not something you should do impulsively. Weigh the benefits against the drawbacks, check your credit utilization ratio, and explore alternatives before making a final decision.
If you're unsure how it will impact your credit score, you can check your CIBIL score for free on various financial platforms. Staying informed is the key to making smarter financial choices!
Disclaimer: This guide is for informational purposes only. Readers are advised to consult with certified financial advisors for personalized advice before making any financial decisions.
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