When is the perfect time to wish for closing your Credit Card?

A credit card is such a medium of payment that helps a person fulfil his wish of purchase without bothering him bothering about money. Perhaps, you get ample offers from your existing credit card companies or new credit card companies. One can become a credit cardholder as much as one wants.

When people want to reduce the amount of debt generally, they wish for closing their credit cards. But, it has been observed that many people wish for closing credit cards after using them for a particular time. The only reason behind such credit card closure can be it can increase unnecessary debt balance.

Sometimes, it has also been observed that if a person wishes to close the card, it will definitely affect the credit score without clearing the outstanding debt. On the other hand, the credit score will run negative if the cardholder is unable to pay the borrowed amount. However, even if you have paid the entire debt balance and still want to close the card, it can also affect the credit score.

For this reason, it is very important to select the right time to close your credit card. Here we will discuss everything about credit card closing.

How to choose the right time to close the credit card?

After holding the credit card for years, it may seem that you want to close the card. Many cardholders even like to close the card even after getting it in the very second year. To close the card at this much of early-stage, usually, they give ample reasons. But whatever the reason is, always try to select the right time to close the credit card. Do you know how you can determine the right time?

Close the card when the credit score is good

Before closing the credit card, you must think about the current credit score. It may be up to the mark, or it may not be in proper balance. If you have a very good credit score, it is absolutely alright to close the credit card. But on the contrary, if your credit score is not up to the mark, then postpone the submission of your card closure form.

There is no due on credit card

Although this is quite common in most of the cases, cardholders forget about this factor. Cardholders who are unable to pay the debt often times wish for closing the card. Basically, even if you deposit the form for closing the credit card, the process will hardly be completed.

It is beyond the rule of credit card companies. So, before you submit the credit card closure form, make sure that there are no such outstanding dues. Only then your credit score will not hamper, and you will become eligible for another upgraded card.

When the APR is high

Many cardholders do not like to hold credit cards anymore due to having a very high Annual Percentage Rate (APR). The credit card company usually applies a certain percentage of increment every year on the credit card. As a result, the rate of interest will increase by some amount.

For this reason, the consolidated rates and charges will increase. A cardholder may wish to close the credit card by paying all the outstanding dues in such a condition. If you find the instalments of credit cards very high, then borrow a 5000 Pound loan for a bad credit score. Pay all those dues, including internal charges and then close the card.

You want to minimise the number of debts

Many cardholders like to close their credit card when they have the multiple numbers of debts. For people, sometimes it becomes difficult for them to carry on a huge number of debts. In order to minimise this number of debts, you may like to close the debit card.

When you have no dues on a credit card, you may indeed close the card in such a condition. Cardholders even give this same reason for closing the credit card that they want to relieve the temptation of overspending.

What are the effects of closing a credit card on your credit score?

There is a misconception within people that after closing the credit card the credit score will rise automatically. But it is not completely true. Rather, if you close the credit card at wrong time then it may hamper the credit score. So, before closing the credit card, you may always think about the consequences.

The ratio of used credit may increase

There are lots of things associated with credit cards. Unlike those, the credit utilisation ratio is one of them. Generally, it defines the amount of debit balance you have already used. If it is higher than the available limit and you are closing the card, the credit utilisation ratio will increase.

However, if you are thinking of closing the credit card with no outstanding left, there is also the chance of hampering your credit score. Even then, the credit utilisation score will increase. A high credit utilisation score will create hindrances in your way for future borrowing.

High chance of dropping credit score

Perhaps you had no issues with the payment of credit card instalments. But to reduce the habit of spending, you want to close the credit card now. If you think that closing the credit card at a very good credit score will not impact you, then it is entirely wrong. Instead, such sudden credit card closure can affect your good credit score.

Low credit history

During a financial crisis, you may need to borrow money. It is entirely unpredictable when and how you need to depend upon debt. Therefore, if you need a loan from direct lenders, even for bad credit, you will hardly get approval after closing your credit card. This is because credit cards will build up a credit history.

Therefore, these are some possible effects on credit score after closing the credit card. Therefore, think twice before closing the card.

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