The use of credit cards is increasing rapidly. Companies give many types of offers regarding its use, due to which its use has increased rapidly. It has also made shopping easier and reduces the worry of accidental expenses even when there is no money in the pocket. However, sometimes due to increasing expenses, some users want to turn it off. Apart from this, some people have more than one credit card, then they want to close some of these cards because it is not easy to track all the cards together. Before closing the card, it is very important to take care of many things and many times there is a possibility of loss due to closing it.
If you are going to invest in mutual funds for the first time, then do not make these mistakes even by mistake, otherwise money will be lost.
pay all bills
According to Gaurav Chopra, Founder and CEO, Indialands, it is important to clear all your due and pending payments before closing the credit card as they attract interest and late penalty charges. Once this is paid, there will be no relationship between you and the credit card company. Another advantage of this is also visible on the credit score. If you are still unable to pay all your dues, you can transfer the credit balance to a new credit card.
no standing instructions
If you pay for Netflix subscription, EMI or utility bill through your credit card, then stop all these payments before discontinuing this card. According to Chopra, all these payments do not stop automatically after starting the card closure process. Till the no-dues certificate is generated, your card keeps getting billed, so if any payments are stopped, the credit score will be negatively affected. In such a situation, in order to avoid any kind of problem later, all auto-payments related to the card should be canceled before applying for card closure.
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Close the new credit card first
If you have more than one credit card then it is better to close the newest credit card first as how old the credit card is, it affects the credit score. If you have an old card, it is believed that you are responsible and there is also benefit in loan and credit card offers.
Do not close the card if you want to apply for big loan
If you use a credit card, it means that you have been a responsible person throughout the period and this has a better impact on your credit score. According to Chopra, closing a credit card can affect the credit score and if a very old card is closed, then this score will be cut more. If this score is low, you may have to pay interest on the loan at higher rates. In such a situation, if you are thinking of taking a loan for studies or home, then keep the card active.
Before closing the card, redeem all the benefits
Using a credit card earns reward points, which can be redeemed against cashback, discounts, coupons, etc. Most of the people do not track these points but when going to close the credit card then check the reward points and after redeeming it apply for cancellation of the card. To redeem it, you can select the option according to you in the rewards catalog.
(Article: Rajeev Kumar)