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The ultimate guide on how to close a credit card
Closing a credit card is a significant financial decision that should be made after careful consideration. While it may seem simple, understanding the reasons behind closing a credit card and its potential impact on your financial health is important. This article will explain the factors influencing the decision to close a credit card and the essential considerations before taking this step.
Reasons to Close Your Credit Card:
Higher Card Charges:
Sometimes, you get a card with a very high annual fee, which you might not be willing to pay. In such a case, opting to close the credit card seems the right option.
Lesser Usage:
Some individuals don't find credit cards helpful in their daily lives. Maybe because their transactions are primarily in cash or otherwise, in such scenarios, one may choose to cancel their credit cards, especially if they prefer alternative payment methods.
Dissatisfaction with Issuer/Benefits:
If you have not reviewed the card benefits prior, you may opt for a card that doesn't serve your needs. Learn how to close a credit card if the card issuer or benefits are unsatisfactory.
Bad Spending Habits:
Impulsive shoppers may accumulate high bills. For them, closing credit cards will curb excessive spending.
Learn: What happens when you apply for multiple cards/loans simultaneously?
What You Should Consider Before Closing Your Credit Card:
Impact on your Credit Score:
Closing credit card usually impacts your credit score because it gives issuers the impression that you don't manage credit well. Before making a decision, understand how it can affect your credit score before deciding.
Unused Rewards and Benefits:
Before you cancel a credit card, make sure that you redeem any outstanding rewards or benefits accrued over time.
Affected Length of Credit History:
Before you understand how to close a credit card, understand its impact on your credit history. Closing old accounts impacts your score and makes it fall by a few points.
Potential Fees or Penalties:
Before you cancel a credit card, check for any fees or penalties imposed by issuers upon closing your credit card.
Check out: Top premium cards in India
How to Close a Credit Card:
Research Your Bank's Process:
Different banks have varying processes for closing credit cards. You can visit your bank's website or app and check out their method of how to cancel credit card.
Reach Out to the Issuer:
If you cannot cancel a credit card through the website, you can get in touch with the card issuer to gather the necessary information and clarify any doubts about the closure process.
Secure Written Confirmation:
Ensure that you obtain written confirmation of the credit card closure whenever you cancel a credit card to ensure a seamless and documented process.
Closing your credit card can be a wise financial move, but it's crucial to comprehend its potential impact on your credit score. By understanding the process and considering the factors mentioned above, you can make an informed decision that aligns with your financial goals.
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