The cancellation of a gold card is seen with a lot of apprehension in the financial landscape of South Africa. The common belief is that such a step could dent your credit score. But that’s not always the matter. If all your charge plate balances have been cleared to zero before cancelling, there might be no dent in your loan rating. Keeping unused credit cards open is generally advisable, but there are good reasons to close them. For example, closing out joint charge plates upon separation or divorce may be prudent. Similarly, if your gold card company is charging high annual fees, it may be prudent to cancel it. These points will be explained in great detail in the article.
How To Cancel Credit Cards Without Impacting Credit Scores
To avoid hurting a loan rating, follow the following steps when closing a charge plate in South Africa: Contact your plate issuer online or by phone. If the card is paid on an annual fee basis, negotiate with customer service. They might waive the fee or offer a no-annual-fee version. Make sure that the remaining balance is paid off before closing the card. If not possible, switch the balance to a low-interest card or set up a payment plan with your issuer.
Also, do not forget to redeem the remaining rewards—these will be lost after a cancellation. Update the billing information for any automatic payments or subscriptions to the card. You can close the account once you have confirmed a zero balance with your issuer. Finally, destroy the cancelled card to prevent any misuse.
Does Cancelling Credit Cards Impact Credit Ratings?
Closing a charge plate can impact your loan rating in South Africa, not the closing, but the side effects that can affect your scores. These could potentially have a more damaging impact on your score, but it is generally less significant than missing a payment. Closing an account, for example, could bump up your credit use of your credit as a proportion of its limit, not only increasing the use of credit across the account in question but also reducing the average age of your credit history.
What To Do With Unused Credit Cards
South Africans always ask what to do with an unused credit card. The answer is not always easy and depends on different factors. Cancellation might reduce the risk of fraud, given that unchecked open accounts are vulnerable. However, it may lower your chances of getting credit. In the case of long-held card cancellation, one may stand a greater chance of being disadvantaged than enhanced.
In addition, the cancellation can raise your credit utilization – the overall credit amount you are using, in other words. This could decrease your score. For example, if your overall limit was R1,000 and you utilized R250, your credit utilization is 25%. But if you close a card and your overall limit goes down to R500 and use R250, your utilization will be 50%.
Is It Better To Cancel Unused Credit Cards Or Keep Them?
Numerous personal and financial factors come into play in determining whether to cancel or maintain the unused cards. There are numerous pros and cons for each decision. Some of the important factors are:
- If you cancel charge plates you no longer use, that can save you from paying unneeded fees, reduce your exposure to fraud, and simplify your money management. On the other hand, it contributes to reducing your rating with the combined effects of the reduced amount of available loans and the reduced average age of all your accounts. This can affect your ability to qualify for loans or get better interest rates.
- Maintaining unused credit cards can help one maintain or improve credit scores by increasing the available credit and the average age of all accounts. This tells lenders that you are a responsible, creditworthy borrower. Nevertheless, these could mean money out of your pocket in fees, tempt you to spend more than you can afford, and even involve a high risk of identity theft.
The best choice would depend on the period of possession of this card, level of usage, card member benefits, and credit goals. If you want to cancel a charge plate, do it correctly to avoid harming your loan rating.
How Long Should You Wait To Close A Credit Card?
If you need to close a charge plate account, a year or more should have passed since the profile was opened. This is due to the possible negative consequence on the credit score and, hence, on its identity with the card-issuing entity in the event of the cancellation of the credit card account in the first year. When you close a credit card, you’re decreasing your available credit, and it can reduce your credit score. It can also result in the issuer taking away your welcome offer or closing other accounts if they feel you are gaming the system. So, closing the credit card should be avoided until one year unless a strong reason befalls, like heavy annual fees or after a security breach.
