Credit cards are an ideal, quick, and easy way to increase your credit score. Financial institutions also have secured credit cards sanctioned against a fixed deposit, specifically to help you improve your CIBIL score.
Using a credit card responsibly can have a positive impact on your CIBIL rating. To do that, you have to keep the credit utilisation under 30-50% of the available credit limit and pay the total amount due within the deadline.
Doing the opposite lowers your CIBIL rating. Cancelling your credit card also has a similar effect.
Hence, you must learn how to cancel a credit card safely without affecting your credit score.
Why and how does cancelling a credit card impact the CIBIL score?
Transactions on a credit card are simply loans you avail to meet your financial requirements. Every single time you repay your outstanding dues, you are exhibiting a responsible financial behaviour and increasing your credibility.
So, if you cancel a credit card, it will only stop a section of your credit report from continuing. Neither will it negate your score, nor will it continue as an opportunity to increase it.
Your CIBIL score or rating only increases if you use your credit card responsibly. The more you use it, the more your credit history lengthens. Hence, cancelling a card brings an end to the history and lowers your CIBIL score.
When not to close a credit card?
You may want to apply for new credit card and cancel an old one. However, giving up an old credit card can have a drastic impact on your CIBIL rating.
An older account will have a longer credit history and credit utilisation rate. These two factors play a crucial role to improve your CIBIL score. Hence, it is not advisable to cancel a credit card that you have for a while now. You can use it every once in a while to keep the credit history alive.
When to cancel a credit card?
Cancelling a credit card is advisable if the debts on it are piling up and you are finding it hard to clear them. Plus, it is not beneficial to have a card that does not provide any benefits. Instead, you can opt for one that comes with lucrative features.
The Bajaj Finserv RBL Bank SuperCard is one such credit card that provides industry-first features like:
- Interest-free ATM cash withdrawal up to 50 days.
- Zero interest emergency personal loan up to 90 days.
Bajaj Finserv also brings you pre-approved offers on credit cards that make availing them hassle-free and saves you time. Theses offers are also available on home loans, business loans, personal loans, and on many more financial products and services. You can check your pre-approved offer by providing only a few essential details.
How to close a credit card?
Usually, cancelling a credit card will impact your CIBIL score. However, you can avoid a noticeable negative impact if you know how to cancel a credit card properly.
Some of the points you need to follow when cancelling a credit card include:
Close the card when you have a high credit score
It is advisable to cancel your credit card when you have a high CIBIL rating. Such impacts will not be drastic in such cases.
Clear the outstanding balances
Make sure to clear all your outstanding balances; you will not be able to close the card if you don’t do so.
You can break the balance into EMIs if you find it hard to clear it. Do note that EMIs will attract interest. However, these are comparatively lower than the finance charges.
Redeem all the reward points
Make sure to redeem the reward points fully before you cancel the card. Also, do check if you are almost close to a threshold to avail some benefits from the card.
Check the terms and conditions of your financial intuition to learn how to cancel a credit card. Also, make sure to handle your cards responsibly to improve your CIBIL score.