So, you want to close your credit card. The reasons for closing a credit card may be many.
- You already hold other cards that provide you sufficient credit limit and you do not need another card.
- Or you are paying an annual fee for the card that you don’t need.
- Or you are fed up with the bank service.
- Or you simply want to get control of your financial life. You believe your credit card is one of the reasons for the financial mess.
Whatever the reason(s) be, you still need to cancel your credit card the right way.
Things to Keep in Mind before You Cancel Your Credit Card
#1 Make sure you utilize your accumulated reward points before cancellation. You will not be able to use those points once you cancel the card. A few banks allow you to make payments using reward points or allow to square off outstanding card bill using reward points. Do not let these benefits (accumulated by virtue of your spending on the card) go waste.
#2 Pay all your dues on the credit card. The bank will not deem the account closed so long as there are any outstanding dues on the credit card. And rightly so. This can be a bone of contention sometimes. You feel you have paid your dues, you ask bank to cancel the card and you forget about the card. The bank considers there is some amount outstanding due to annual fee or some dispute. And the bank does not forget about this. The bank does not close the card. The annual charges keep accumulating. Add interest charge and penalty to this too. You find out about this only when you apply for a loan/credit card or happen to check your credit score.
#3 Auto-debit instructions will bounce once you cancel the card. It is not uncommon to set up auto debit instructions on your card for utility and insurance payments. Make sure you set up these instructions with a different bank or a credit card account. Or remember to make these payments manually on time. Missing these payments can cause some inconvenience. In fact, missing out on insurance payments can land you in big trouble. Insurance is a contract and insurance company isn’t liable to pay if you skip your premium payments.
How to Cancel Your Credit Card?
Once you have settled all the dues, you need to communicate your decision to the bank. Alternatively, if you ask the bank to close the card, the bank will ask you to settle the dues first. If you have spent heavily on the card, the bank may even try to retain you by granting you fee waivers, a higher credit limit, a more premium card or other benefits. You need to decide how you want to proceed.
- You can fill up closure form and send to the bank.
- You can call up customer care and ask them to cancel the card.
- You can use the mobile app to send closure request.
- You can send an e-mail to the bank to close the card.
If everything is in place, you may get an SMS or e-mail to confirm that your card account has been closed.
Remember your card cancellation request is a proposal. The bank must accept it for the transaction to complete. It is always better to have proof of such acceptance. And yes, bank acknowledgement of your closure request is not confirmation. It is merely an acknowledgement that you have applied for card cancellation. To guard against any negative surprises in the future, you need confirmation that the card account has been closed. For this, once everything is done at your end, you can mark an e-mail to the bank asking them to confirm if the credit card account has been closed. You can keep bank confirmation as the proof of card cancellation.
What Are the Red Flags? What Are the Issues if the Card Is Not Properly Closed?
- You keep getting monthly statements even after you have closed the account (on e-mail/correspondence address). Even though the statement shows the outstanding amount as zero, this still means there is something wrong. You don’t get statements for closed accounts. You may feel there is nothing to worry about since the statement amount is zero. However, there may be an annual fee coming in a few months.
- Or worse, there could be a fraud on the credit card. Even though the Reserve Bank has limited your liability in case of such transactions, you still need to communicate to the bank quickly and then follow up with the bank. Quite a bit of mess for a credit card that you thought you had cancelled. Remember, in such cases, your defense that you had cancelled the card will not hold much ground. After all, you had been receiving monthly statements for all these months or years.
How to Be Sure of Credit Card Cancellation?
In addition to an e-mail confirmation (as mentioned in an earlier section), there is another method to check if the account has been closed. You can download your credit report from any of the credit bureaus. In fact, you can download one credit report per credit bureau per calendar year absolutely free of cost. Your credit report provides details of all your loans and credit cards. You can check your credit report (after a few months) to see if the credit card account under question shows as active or closed. If the account still shows as active, you need to follow up with the bank. If the account shows as closed, your work is indeed done. You can save a copy of the report for future reference.