Planning to close your credit card. Here are 5 things to keep in mind

Credit cards serve as one of the important financial instruments for users to manage day-to-day expenses. However, there are instances when users may consider closing it to decrease overspending and to avoid the hassle of keeping track of multiple cards.

Here are five things to keep in mind if one is planning to close a credit card:

1. Pay off the balance in full: Before closing a credit card, it is extremely important to clear all outstanding bills as these attract interest. If you are late in paying your dues, you will also be fined.

2. Stop AutoPay payment first: Before applying for the closure of the credit card, stop all auto payment payments associated with it. It happens many a time that the credit card holder may have a subscription to Netflix or other such platforms or they may also be paying EMI and other bills with the card. These payments do not stop automatically once you initiate the credit card closure process. This can damage your credit score.

3. Credit card’s age matters: If one has multiple cards, it is better to close the newer cards first. While closing the credit card, consider the age of the card since the age of the credit account has a major impact in the computation of the credit score.

4. Loans: If one wants to apply for a big loan, then do not close the credit card. Closing a credit card can affect the credit score. If the score is low, one may have to pay interest at higher rates on the loan.

5. Redeem all points: Credit card offers reward points that can be redeemed for cash back, discounts, coupons etc. Before closing the credit card, one should make sure to redeem all the existing points and only then apply for cancellation. One can redeem the points by visiting the reward catalogue and choose any of the available options to redeem the points.