When Should You Close Your Credit Card Account?

Do you feel you have too many credit cards? Are some of them lying idle with you? In such a case, you should close these credit cards, but closing them will also impact your credit score. It will impact the ‘credit utilisation’ ratio or the credit used against the available limit. Credit utilisation ratio is one of the factors based on which credit scores are calculated. So before closing that credit card, try and ascertain if it is the right move for you. Consider the following.

· Spendthrift
If you are a spendthrift and end up making purchases that are beyond your servicing capacity, it makes sense to close your credit card. Although this is not the best solution to the problem, it will definitely ensure that you won’t fall into a debt trap. It will also reduce opportunities to shop around randomly without any genuine need.

· High fees
If your credit card has high annual fees, you should repay your balance and close the card. Issuing companies do offer credit cards with ‘zero’ annual fees for the initial 1-2 years. But these are ways to lure you into buying credit cards from them. If you feel that the annual fees are pretty high and unfair, you should do away with the card.

· Repayment issues
If you are only repaying the minimum amount due on your credit card or frequently end up making late payments, it may be time to close your credit card.

· Balance transfer
If you have opted for a balance transfer, it might be a good move to close that high interest-incurring credit card. The fact that you have opted for a balance transfer indicates your inability to service that card.

High fees, high interest rates, zero loyalty programme or strain in repaying monthly dues – do you associate your card to any of these? It’s time to close that card then.


Satish Mehta is the founder and director of Credexpert, a credit and debt counselling company in India.

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