Satish Kumar, an animation professional from Mumbai has multiple credit cards that he hardly uses. Chased by credit card sales agents with lucrative offers such as no annual fee Satish ended up owning more than four credit cards, but he uses only one out of them. To his utter surprise Satish got a bill from the bank with charges for non usage of the credit card. Satish is one of the large numbers of people who are unaware of the credit card cancellation process. Any credit card cancellation must be in accordance with the banks exit policy or else it can come back to haunt the individual for pending dues and reflecting a very poor credit score. Let us take a look at the process of cancelling and closing a credit card.
Choose the Credit Card to be cancelled wisely:
If you have multiple credit cards, it is recommended that you should never close all credit cards at the same time. Closing too many cards at once can reflect badly in your credit score and can strongly hamper the chances of getting a loan or applying for a new credit card in the future a problem. It is useful to compare the rewards and schemes, interest rates and other details of various credit cards and choose the one that offers the least advantage. Also it is recommended to continue older credit cards and close the one which has been attained relatively recently to avoid any dent in your credit score.
Steps Involved in Closing a Credit card:
Communicate with the Bank: Once you have decided on which credit card to cancel first, the first step is to call the concerned bank and intimate them about card cancellation request. One can start by calling up the customer care number of the credit card issuing bank and follow up the request using a written communication either directly or through an email. The written communication not only helps the bank cross check and verify the authenticity of the request but is also useful in case of any disputes.
Clear off any Pending Balance: The bank will cancel a credit card only after it is free of any pending balance which is due to the bank. The customer care executive can update the person on any pending balance on the credit card including any interest, fee or other charges. If there is a balance due on the credit card, the user must make a payment to clear of the dues either in lump sum or in installments as per his or her convenience. It is however imperative to know that in case one decides to pay the dues in a monthly installment, one will still accrue interest on the balance amount. The timing for cancellation request also plays a very significant role as any request to cancel the card after the billing date may result in residual balance not reflected in the credit card statement. The customer care for the concerned credit card bank will update on any such residual balance as well. Pay off your pending amount and keep a record of the payments made for future use in case of any dispute.
Fight off the Persuasions: The rising competition in the credit card segment means that banks do not want to let go of customers. Since credit cards offer good financial revenues to the banks, they go all out to persuade user to withdraw any cancellation request. Banks may even offer a lucrative lower interest rate and other freebies to hold on to the customer. Remember, sticking on to an unwanted credit card is bad idea no matter how lucrative the interest rate and other rewards may be. Stick to your decision once you have made your mind to cancel your credit card.
Follow up On Final Cancellation: Once you pay off all pending dues for the concerned credit card, insist on getting a written acknowledgement from the bank that the credit card has been cancelled and all pending dues have been received by the bank. Once the bank gives a written confirmation letter, the user must destroy the card in his or her possession by cutting the card across the magnetic strip to complete the cancellation process.
Check Your CIBIL Score for Updates: Since closing a credit card one is reducing his or her credit limit, the same gets reflected in the CIBIL credit score. Keep a watch on your CIBIL credit report post cancellation of your credit card. This will allow you to keep a check on the extent of damage the credit card cancellation had on your overall credit score. Since credit utilization ratio decreases after cancellation of each credit card, closing a credit card can hurt your CIBIL score temporarily. Remember it is easier to rebuild a bad credit score than fight off huge debt trap of credit card dues.