Is it a good idea to close your credit card?

5 MinsMay 5, 2023

Credit cards can be a valuable tool to manage your finances, build a credit history and earn rewards. However, there may come a time when you consider closing a credit card account, whether it's to reduce your credit exposure or simplify your financial life. While cancelling a credit card may seem like a straightforward decision, it's important to understand the potential consequences and whether it's the right move for your financial upkeep. Let us explore the pros and cons of closing a credit card account, factors to consider before making a decision and alternative options to help you manage your credit effectively.

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How closing a Credit Card impacts your credit score?

Closing a credit card can have both positive and negative impacts on your credit score. If you have a high balance on a credit card that you're not using, closing the account can help you minimize your debt and improve your credit utilisation rate, which is the amount of credit you're using compared to your total credit limit. Lowering your credit utilisation rate can help increase your credit score. Additionally, if you're closing a credit card that has a history of late payments, closing the account can prevent further damage to your credit score.

However, closing a credit card can negatively impact your credit score. First, closing a credit card reduces your available credit, which can increase your credit utilisation rate and decrease your credit score. Additionally, closing a credit card account can shorten the length of your credit history, which is an essential factor in calculating your credit score. If you have a long credit history, closing a credit card account can reduce the average age of your accounts and hurt your credit score. Finally, closing a credit card account can also reduce the types of credit you have, which is another factor in calculating your credit score.

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[Also Read: 6 mistakes to avoid when using Credit Cards]

When to close your credit card?

It can be a good idea to close your unused credit cards under certain circumstances. For instance, if you have several credit cards that you're not using, closing them can simplify your financial life and reduce the risk of fraud. Additionally, closing unused credit cards can help you avoid paying unnecessary annual fees or other charges, especially if you're not taking advantage of the card's benefits.

Closing unused credit cards can also be a good idea if you're struggling to control your spending and need to reduce your credit exposure. By closing unused credit cards, you can reduce your credit limit and minimise the temptation to overspend. Moreover, if you're planning to take out a major loan shortly, such as a mortgage, closing unused credit cards can improve your credit utilisation rate and help you qualify for a better interest rate.

How to close a Credit Card?

To close a credit card, you'll need to follow a few simple steps:

  • Pay off any outstanding balance.
  • Contact the credit card issuer.
  • Confirm the account details.
  • Request a confirmation number.
  • Monitor your credit report.


It's advisable not to close a credit card account without a valid reason, as having multiple credit cards may not have a significant impact on your credit score if you manage them responsibly. With an Axis Bank credit card, you can enjoy the benefits of having multiple cards, such as cashback, reward points, discounts on shopping, dining and travel options, while still being able to manage your accounts efficiently through easy online account management and fraud protection measures.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.