If you have a credit card that you rarely use, or you are disturbed by an increased annual fee, then it is understandable that you could be contemplating to cancel your credit card.
Although a small act of cancelling a card can be bad for your credit score. Yes! It can affect your credit score severely
Sounds strange, but it is true!!
This ratio is calculated by dividing your credit card balance with the overall credit limit multiplied by 100. So higher would be the ratio, the lower the credit score.
Second, cancellation of credit cards leads to a reduction in the average age of accounts in your credit report. And it is to be noted that the lower the average age of accounts, the lesser would be your credit score.
Why do you want to close it?
Before you decide to close your credit card account, make sure that there is a genuine reason behind the same. There could be “n” number of reasons.
One of them could be the bank is charging a high annual fee. The other reason is you have a number of credit cards that you may actually require. And the third one can you have a joint account that you plan to close for personal reasons.
How to make sure your credit score does not suffer?
If you don’t want to credit score to be damaged, make sure you keep the credit card for some time. To avoid paying off the annual fee, you can ask for this fee to be waived.
You need a pause to the purchases from credit card. However, if there is no choice left but to cancel the credit card, then you need to pay all the credit card balances at outset before the outstanding credit card.
After cancelling the card, it is recommended to send a notice in writing to the credit card issuer to confirm the cancellation. And it goes without saying, you should destroy the credit physically as well.
