Swapnil was shocked to know that his home loan application was rejected by the bank due to a poor credit score. He was disciplined with his financial transactions and had a clean track record for all his previous loans.
When he checked with the bank, Swapnil came to know that the reason was a credit card default. Swapnil had only two cards and there were no dues on them. On probing further, he came to know that a card he had closed long back showed some dues.
Dues on a closed credit card?
To close the credit card, Swapnil forwarded a written request to the bank and presumed that the card had been cancelled. There had been small, unnoticed due on the card, and the bank started charging interest upon it. As interest accumulated, the amount became huge and moreover, as the card company didn’t close the card due to dues, the renewal fee also kept adding up.
Swapnil had shifted to a new town and was not getting any statements from the card company, and was unaware of this.
The total amount turned out to be Rs.30000 to Swapnil’s shock, and he was left with no choice but to pay the due amount and opt for a credit card cancellation through the right channel and protocol.
What do we learn from this situation?
Closing a credit card must be done very carefully, just like opting for a credit card and managing it. If you are planning to close any of your existing credit card accounts, it is important to follow the entire cancellation process and get a written confirmation or No Due Certificate from your bank to avoid any problems in the future.
Follow the below steps to ensure that your unused credit card is cancelled in the right way.
Steps to follow when cancelling your credit card:
Here is a seven point checklist for you to follow while cancelling a credit card.
Step 1 – Clear all the dues: The first step you should follow while cancelling a credit card is to make sure that there are no dues to be paid. Unless all dues have been cleared from your side, the bank will not cancel the card. For cards with dues, banks will only initiate deactivation, but not cancellation. If you are planning to pay off your pending dues in monthly installments, you will incur interest on the balance amount and the card will be closed after full settlement only.
Step 2 – Initiate a cancellation request with the credit card customer care: You can call up the 24/7 customer care helpline for your card and request for a cancellation. The customer-care execute, on initiating action against your request, will provide a reference id (ticket no) which can be used for all future communications with the bank.
Step 3 – Give a written application to your bank: Relying on oral communication is not good, especially when it comes to card cancellation. To be on the safer side, write a request for card cancellation, mentioning the ticket number facilitated by customer care helpline. Submit the written application with your bank branch or through e-mail, and take a confirmation of the same for your record.
Step 4 – Fight off any lucrative last minute offers for you to stay: No bank likes to lose customers and they will try to retain customers seeking card cancellation. You may get discounts and offers for staying back and not going ahead with your card cancellation. Make sure to fight off such offers if you have made up your mind to cancel your card.
Step 5 – Check final cancellation: Once the bank cancels your credit card, ask for a written confirmation letter or No Due Certificate from the bank stating that all pending dues have been received and the card has been cancelled. Do not presume that the card is cancelled unless you get a written communication from your bank.
Step 6 – Dispose the cancelled card: Once this is done, make sure to dispose the card. This step is important to avoid any misuse of it in the future. Cut off the card in four pieces, cutting across the magnetic tape or embedded chip.
Step 7 – Keep an eye on your credit score post cancellation: By closing a credit card, you are effectively reducing your overall credit limit. This change will reflect in your credit score. Keep a watch on your credit report post the cancellation of your credit card. This will help you to know if the card company has made any incorrect remarks in your credit report. Closing a credit card can bring down your credit score temporarily but you can increase the score if you are maintaining a good financial track record.
Adequate attention should be given while opting to close a credit card. If the due process of cancellation is not followed, credit card dues can come and haunt you financially. The above discussed points will help you to close a credit card in the right manner.