Are you guilty of holding multiple credit cards that you don't actually need? Don't worry, you are not alone. There are many people who give in to the push of credit-card sales agents offering lucrative deals. The problems start when you are billed for non-usage of cards. Why should you pay for not using a card, you may think – but this clause was probably there in the fine print, and the fact is, there is nothing much you can do to change the policy of the card issuers. What you can do is to cancel the cards that you do not use.

How do I decide which credit card should be cancelled?
You should never close all unused credit cards at the same time. Closing too many cards at once can reflect badly on your credit score, and can strongly hamper your chances of getting a loan or applying for a new credit card in the future. What you can do is to evaluate your usage pattern, and the reward schemes and interest rates of all the cards, and then cast off the one that offer the least advantage. It is also a good idea to continue using older credit cards and close ones that you have acquired relatively recently.

How should I close or cancel a credit card?
Once you have decided which credit card you want to cancel, your first step should be to intimate the concerned bank about your intention through the proper channel. It makes sense to do this by sending a written request, as this not only helps the bank cross-check and verify the authenticity of the request, but it also proves useful in case of disputes.

The bank will only cancel a credit card that is free of any pending balance dues; a customer-care executive should be able update you about this, including interest fee or other charges. If there is a balance due,  you will have to make a payment to clear it, either lump-sum or in installments, as per your convenience. It is always a good idea to pay off your pending dues and keep a record of your payments, in case of disputes.

Once you have paid off your dues, insist on getting a written acknowledgement from the bank that the credit card has been cancelled and that the bank has received all pending dues from you. Once the bank gives you  this confirmation letter, you must destroy the card in your possession by cutting it across the magnetic strip - only then is your cancellation process complete.

Please remember that your credit-utilization ratio decreases after you cancel each credit card online - closing a credit card means that you are reducing your credit limit, which is reflected in your CIBIL credit score. Make it a point to keep a watch on your CIBIL credit report after you cancel your credit card. This will allow you to keep a check on how much damage the cancellation had done to your overall credit score. While closing a credit card can hurt your CIBIL score temporarily, don't fret – it is much easier to improve a low credit score than to fight off a huge debt trap of credit-card dues from multiple credit cards.

 

Disclaimer: Copyright Kotak Mahindra Bank Ltd.

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