How to Close/Cancel a Credit Card Account

There are several ways to initiate a credit card closure request which have been mentioned below for your reference. However, the Reserve Bank of India (RBI) has recently laid down some rules regarding credit card issuance and closure which will be effective from July 1st 2022. Click here to read the new rules:

Written Applications

Cardholders can write an application and address it to the nearest branch or to their mailing address. Do note that the application should have the relevant details (Name, card no., expiry date, etc.) so as to initiate credit card cancellation.

Email

Customers can send an E-mail addressed to the customer care address to initiate card cancellation. Remember to provide the necessary personal and card details in the email. Afterwards, a representative from the bank will call the customer to confirm the decision.

Customer Care

Customers can also call the credit card provider’s customer care centre, the number for which is usually printed on the back of the card. Alternatively, they can visit the card provider’s website to know the customer care number.

Branch Visit

Customers can visit the bank’s branch to request card cancellation as well. Remember to carry the credit card and ID proof to verify your identity.

RBI’s New Rules on Credit Card Closure

Credit cards shall be closed within 7 working days after raisin a credit card closure request. However, the card would only be closed if the cardholder has paid off any outstanding amounts. Credit card issuers will be liable to pay a fine of Rs. 500 every day until the card account is not closed after the customer has raised a card closure request If a card is not used for a year, the card issuer will deactivate it and notify the user. If the cardholder does not respond within 30 days, the account will be closed. Card issuers must provide several channels for submitting a closure request, such as mobile banking, online banking, a helpline, an IVR, a dedicated e-mail address, and a mobile app. If the cardholder’s account still has credit available, it should be transferred to his or her bank account.  The credit bureau must be notified by credit card issuers within 30 days of the closure.

Clear Due Payments

Cardholders must clear all their dues on the card. These include EMIs, Loans, balance transfers, and so on. Banks may deny a cancellation request if all the dues haven’t been paid.

Use the Reward Points/Airmiles

Credit card transactions accumulate reward points/airmiles on the credit card. These should be utilized by the cardholder. The bank might cancel all the points or miles once card cancellation has been activated.

Cancel all Automatic Payments

Subscriptions, where the amount is deducted directly from the credit cards, should be cancelled. This should be done prior to cancelling the credit card. This will ensure a smooth cancellation process.

Don’t Use Card after Cancellation

Credit cards should not be used from at least one month prior to cancellation notice. This will ensure that there is no balance on the card which in turn will ensure quick cancellation.

On cancelling a credit card the total credit limit of the individual will be lowered. Considering that the expenses remain the same, the credit utilization ratio will rise drastically. This may hurt the customer’s credit score. Also, on closing a credit card the average credit history will be shortened. This too negatively affects the credit score. So, cardholders should review their decision thoroughly before deciding on closing a credit card.

Further Read – Should You Close Unused Credit Cards?

Will a cancelled or a closed credit card affect your credit score?

Closing a credit card will impact your credit score indirectly. If you close a card that you have for about 5 years and that has a credit limit of Rs. 2 Lakh, the availability of your credit will be drastically lowered. Due to this your overall utilization ratio may go up since your available credit will be lowered by Rs. 2 Lakh. A high credit utilization ratio may impact your credit score negatively.

How should the credit card be disposed?

The plastic credit card can be disposed of by cutting the card diagonally. Cut the card in such a manner that you cut through the magnetic strip (black strip). This will render the card invalid.

Can a credit account once closed be reactivated?

Yes, some banks do offer this facility but it is extended only for those credit accounts that were closed by the cardholder directly and not for those that the bank closed at its discrepancy.

Does cancelling an add-on card affect the primary credit card?

No, it does not. Add-on cards are can be cancelled without having to cancel the primary card. Also, add-on card cancellation won’t affect primary card-holder’s credit score.

Can the rewards be availed after initiating cancellation?

It depends on the lender and their terms and conditions. However, customers should aim to use all the reward points before cancelling their credit card.

When should we not apply for a credit card cancellation?

Customers should avoid cancelling a credit card when they have a weak credit score.

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