Ever tried to close a credit card? If you have, you know it is not easy. Not all banks cooperate when you try to close/cancel a credit card. What if I were to tell you that your bank must pay you a penalty of Rs 500 per day for each day of delay beyond 7 days in closing your credit card?
Interesting, isn’t it? Exactly. And that’s what RBI has spelled out in the latest Master Direction on Credit Card and Debit card- Issuances and conduct. While the entire document makes for an interesting read, I will discuss points pertaining to cancellation of credit cards.
Why Would You Need to Cancel/Close a Credit Card?
You can just stop using it. If you don’t use it, you don’t have to pay anything. You can just forget about the card. Fine, but there are issues in retaining the cards that you don’t use.
The card may have fee/charges that you will unnecessarily continue to bear. Worse still, there could be a fraud using your credit card. While the RBI regulations limit your liability in case of card frauds if you act swiftly, this is unnecessary pain for a card that you don’t even use.
Therefore, you must rationalize the number of cards and get rid of credit cards that you don’t use. However, the banks may not as co-operative when you want to close your credit card, even when you do not have any outstanding amount on your credit card.
Here are a few regulations that make it easier for you to cancel a credit card:
#1 Auto-Cancellation of Credit Card if the Card Is Not Activated within 30 Days of Issuance
If the cardholder does not activate the card for over 30 days from the date of issuance, the bank must seek OTP based consent from cardholder to activate the credit card. If no consent is received from the cardholder within 7 days of seeking consent, the bank must close the credit card without any cost to the cardholder. This rule applies to renewed or replaced cards too. The only additional condition for closure is that there must not be any outstanding on the card.
In case of new credit cards, the banks shall not report any credit information pertaining to the new card until the credit card is activated.
#2 Credit Card Closure Request to Be Honoured within 7 Working Days
This is subject to payment of all outstanding dues by the cardholder. The bank (credit card issuer) must provide cardholders the option to submit the cancellation request through various channels such as:
- Dedicated email id
- Interactive Voice response (IVR)
- Prominent visible link on the website
- Internet banking
- Mobile app
The bank cannot insist on sending a closure request through post or any other means which can lead to delay in receipt of closure request. And that is a ploy many banks use. Not anymore.
Provided there are no outstanding dues on the credit card, the bank must cancel the credit card account within 7 days of receipt of closure request. Beyond 7 days, the bank must pay Rs 500 per day to the customer for each day of additional delay until the account is closed.
#3 Your Credit Card Will Be Automatically Cancelled if the Card Has Not Been Used for over 1 Year
This is good. If you do not use a card, it will automatically get cancelled after 1 year of non-usage. In the card has not been used in the past 12 months, the bank must intimate the cardholder about the implications. If the cardholder does not reply within 30 days of intimation with the intention of continuing the card (or does not use the card), the bank must close the credit card. This is again subject to payment of all dues by the cardholder.
The cancellation of a credit card is not an event that you would encounter on a regular basis. While this should be a straightforward process, the banks can make things difficult for you and for obvious reasons. And that’s where it helps if you know your rights and the regulations. A common requirement for credit card closure (automatic or manual) is that your credit card account should not have any outstanding balance. Even the tiniest of charges/outstanding amount on the card can cause problem. The banks can use that as a reason to not allow you to cancel your credit card and not trigger automatic cancellation. Be responsible and don’t allow banks this excuse to not cancel your credit card.