Should you close an old credit card you no longer use? Check this first

As per the latest business developments, There is usually a simple reason for wanting to close an old credit card. Maybe you have moved to a newer card with better rewards, stopped using the old one or simply want fewer accounts to track. But before calling the bank, take a closer look at how that card fits into your overall credit profile.

Closing a card does not automatically mean your CIBIL score will decline. The impact depends on factors such as your available credit, utilisation and the length of your credit history.

Your total credit limit will come down

This is one of the first things to consider.

Suppose you have two cards with a combined limit of Rs 4 lakh and usually owe Rs 60,000. Your credit utilisation is 15 percent. If you close a card with a Rs 2 lakh limit, the same Rs 60,000 outstanding becomes 30 percent of your remaining limit.

Your spending has not changed, but your utilisation has doubled. Elevated utilisation can make your credit profile appear more dependent on borrowed money and may affect your score. Experts generally suggest keeping utilisation below 30 percent, although there is no set level at which a score automatically falls.

Your oldest card may be worth keeping

An old credit card can be useful even if you rarely use it.

A long-standing account with a clean repayment record adds depth to your credit history. If the card you want to close is your oldest account, cancelling it could affect your credit profile over time. This can be particularly relevant if you have only a few credit accounts.

But age alone is not a reason to keep a card forever. If you are paying a substantial annual fee for benefits you never use, closing it may still make financial sense.

A lifetime-free card may not need to go

If the card has no annual fee, a good repayment history and a useful credit limit, there may be little reason to close it simply because you rarely use it.

Keeping it open preserves available credit and can help keep overall utilisation softer. That stated, there is additionally a practical side. If managing several cards means forgetting subscriptions, payments or transactions, simplifying your finances may be the better choice. Clear all dues before closing

If you decide to cancel the card, first clear outstanding dues and check for pending transactions. Move recurring payments to another card and redeem unused reward points, where applicable.

RBI rules require card issuers to honour a closure request within seven working days once outstanding dues have been cleared. The issuer must additionally notify the cardholder around the closure.

Keep the closure confirmation and check your credit report after the account has been updated. CIBIL says lenders typically submit updated information every 30–45 days.

Do not replace it with several new cards

If you are closing the old card to get a new one, avoid applying for several cards at the same time. New applications can create lender enquiries, and multiple enquiries within a short period can work against your credit profile.

This becomes more important if you plan to apply for a home, car or personal loan soon. Keeping your credit profile stable may be preferable to making several changes at once. So, should you close it?

There is no universal answer. An old, lifetime-free card with a clean repayment history and useful credit limit may be worth keeping. A card with a high annual fee, limited benefits or a tendency to encourage unnecessary spending may be better closed.

Before cancelling, check the card's age, credit limit, annual charges and role in your overall credit profile. An account sitting unused in your wallet may still be quietly helping your credit history.