Thinking of Closing an Old Credit Card? How It Affects Your CIBIL Score (And How to Cancel It the Right Way)
News
by
Wisor
That old credit card in your wallet hasn't been used in months. Maybe it has an annual fee you don't want to pay anymore, or you've simply moved on to better cards. Closing it feels like the tidy thing to do.
But before you call the bank, it's worth knowing: closing a credit card, especially an old one, can lower your CIBIL score. It doesn't always, and sometimes closing a card is still the right call. Here's how credit card closure affects your score, and how to close a credit card the right way if you decide to.
Does closing a credit card affect your CIBIL score?
It can, in two main ways.
1. Your credit utilisation ratio goes up
Your credit utilisation ratio is the share of your total credit limit that you're using. It's one of the biggest factors in your CIBIL score. When you close a card, its limit disappears from your total, so the same spending now uses a bigger share of what's left.
Before closing | After closing one card | |
|---|---|---|
Total credit limit | ₹3,00,000 (three cards) | ₹2,00,000 (two cards) |
Monthly spend | ₹50,000 | ₹50,000 |
Credit utilisation ratio | About 17% | 25% |
Same spending, higher utilisation. The more you spend and the bigger the closed card's limit, the more this matters.
2. Your credit history gets shorter over time
The length of your credit history also counts. An old card is often your oldest account and the one that shows lenders a long, steady record. Closing it means it stops adding to that history. The account can stay on your credit report as "closed" for some time, but over the years, your active credit history looks younger without it.
What closing a card doesn't do
It doesn't erase your past payment history. On-time payments made on that card still count in your favour.
If the card had missed payments, closing it doesn't remove them from your report either.
When closing a credit card makes sense
Closing a card isn't always a mistake. It can be the right choice when:
It has a high annual fee you can't get waived and the rewards don't make up for it
It tempts you to overspend and you're carrying a balance you struggle to clear
You have too many cards to manage and keep missing due dates
It's a newer card you don't need, rather than your oldest one
You're worried about fraud on a card you never use
Before you close a card for its fee, try these first:
Ask for a fee waiver. Many banks waive the annual fee if you've spent a certain amount or have a good relationship with them.
Ask for a downgrade to a lifetime free version of the card. You keep the account, its age and its limit, without the fee.
Which card should you close?
If you're closing one card out of several, close the newest card with the smallest limit, not your oldest card. That keeps your longest credit history and most of your total limit intact, so your CIBIL score takes the smallest hit.
How to close a credit card: step by step
Clear all your dues. The bank will only close the card once your outstanding balance is fully paid, including any EMIs.
Redeem your reward points. Unredeemed points are usually lost when the card is closed.
Cancel auto-debits and standing instructions linked to the card, like subscriptions, insurance premiums or utility bills, and move them to another card or account.
Raise a closure request. Use any of the bank's channels: customer care helpline, email, the bank's app or net banking.
Get written confirmation. Ask for a closure confirmation or a no-dues certificate for your records.
Destroy the card once closure is confirmed.
Check your credit report after a month or two to make sure the card shows as closed with no dues.
Your rights when closing a credit card under RBI rules
RBI's credit card rules protect you if a bank drags its feet:
Situation | What the RBI rules say |
|---|---|
You ask to close your card | The bank must close it within 7 working days, as long as you've cleared all your dues |
The bank doesn't close it in time | It must pay you ₹500 for every day of delay until the card is closed |
How you can ask | Banks must offer several channels, like a helpline, email, IVR, website, net banking or app. They can't force you to send the request by post |
You have a credit balance on the card | It must be transferred to your bank account |
After closure | The bank must update the closure with credit bureaus within 30 days |
A card you haven't used for over a year | The bank can close it after telling you, if you don't respond within 30 days |
If the bank doesn't follow these rules, raise a complaint and escalate it to the RBI Ombudsman if needed.
How Wisor helps you decide which cards to keep
Deciding whether to close a card comes down to what each card actually costs and earns you, and what closing it would do to your credit health. That's exactly what Wisor, CheQ's AI credit card expert, is built for.
Analyses your spends across all your cards. Wisor looks at your real spending on every card and shows you how to maximise rewards, so you can see which cards are actually earning their place.
Flags hidden fees. It highlights unnecessary charges, like annual fees on cards you barely use, and missed reward opportunities.
Not sure which card to close?
Ask Wisor in the CheQ app. It helps you spot the cards that cost you more than they give, avoid hidden losses and make data-backed card decisions without hurting your CIBIL score.
FAQs
Does closing a credit card affect my CIBIL score?
It can. Closing a card reduces your total credit limit, which raises your credit utilisation ratio, and closing an old card can shorten your active credit history over time. Both can lower your CIBIL score.
Is it better to close an old credit card or a new one?
Usually a new one. Keeping your oldest card helps maintain a longer credit history, which is good for your CIBIL score.
How do I close a credit card?
Clear all your dues, redeem your reward points, cancel any auto-debits on the card, then raise a closure request through the bank's helpline, email, app or net banking. Ask for written confirmation once it's closed.
How long does a bank take to close a credit card?
Under RBI rules, the bank must close your card within 7 working days of your request, as long as your dues are cleared. If it's late, it must pay you ₹500 for every day of delay.
Should I close a credit card with an annual fee?
Not necessarily. Ask the bank for a fee waiver or a downgrade to a lifetime free card first. Closing is the last option, especially for an old card.
What happens to my reward points when I close my credit card?
They're usually lost. Redeem them before you raise the closure request.
Will an unused credit card be closed automatically?
Under RBI rules, a bank can close a card that hasn't been used for over a year, but it has to inform you first and give you 30 days to respond.
