Closing Your Credit Card? Know This First

Closing an unused savings or current bank account generally does not directly affect your CIBIL score because deposit account details are not part of your credit report. However, if loan EMIs or credit card payments are linked to that account through auto debit mandates, closing it without updating those instructions could lead to missed payments and potentially affect your credit profile. Experts advise checking and transferring all active auto debit mandates before closing an account.

Closing a credit card, however, can have an impact depending on your overall credit profile. When a card is closed, your total available credit limit decreases, which can increase your credit utilisation ratio. For example, if your total credit limit is Rs.5 lakh and you use Rs.1 lakh, your utilisation is 20%. If a card with a Rs.1 lakh limit is closed, the available limit falls to Rs.4 lakh and utilisation rises to 25%. Closing an old card may also reduce the benefits of having a long credit history.

Experts say timely repayments, controlled credit utilisation, responsible management of existing credit accounts and limiting frequent loan enquiries are important for maintaining a healthy credit profile. Before closing an old credit card, consumers should clear all outstanding dues and consider how important the card is to their credit history. If the card has no annual fee and is well managed, keeping it active with occasional responsible use may help preserve a longer credit history.