Decoded: Top 3 Myths About Credit Card Cancellation

Some people take pride in having credit cards – as many as their wallet allows them to hold. But people who have so many cards also know how troublesome it is to keep track of payment due dates, make payments on time and ensure that one is not billed wrongly. If you have burnt your fingers over so many cards and now want to close some of the cards you don’t use, it is important to decode the myths concerning the credit card cancellation process.

Myth 1: Closing a credit card reduces your debt.
Reality: Closing a credit card does not reduce your debt burden by a single rupee. If you owe a lender Rs 10,000, the lender won’t close your account until you have paid the entire amount due.

Myth 2: Closing a credit card loses the credit age of the account.
Reality: A 5-year debt is a 5-year-old debt; it will be a 6-year-old debt in a year’s time. The credit score will even record the date of opening the credit card account. Even the accounts that are closed continue to age because the CIBIL report will still provide information about your repayment history.

Myth 3: Closing the credit card knocks off your CIBIL score.
Reality: This is true to some extent. Closing a credit card with a high credit balance does affect your score temporarily. Therefore, close a card with a lower limit. When you close a credit card, you will reduce your overall credit limit, which can lower your credit scores. The fall in score depends on the amount of debt you carry on other credit cards.

About the author: Rajiv Raj is the director and co-founder of www.creditvidya.com.