Closing a credit card with outstanding EMI? Experts explain hidden charges and rules
Are you aiming to cancel your credit card? Are you aware of the procedure to accomplish it successfully? Have you carefully checked the total outstanding amount on your credit card account?
Having clarity on these aspects is essential to ensure that your credit card closure experience remains smooth and unwanted payments or interest charges are avoided. All credit card users need to be very careful before closing, as credit card debt compounds quite rapidly.
Furthermore, do keep in mind that closing a credit card will not automatically end your repayment obligations. Any EMI linked to a card transaction generally continues until the outstanding amount is cleared, subject to the issuer’s terms and conditions.
Having a clear discussion with the customer support team at your credit card-issuing financial institution is the best way to resolve any discrepancies or doubts regarding pending payments before closing out your credit card.
Cancelling the card does not cancel your EMI obligation
Nicky Sehwani, CBO, InstaMoney, explains this aspect in detail. “Cancelling a credit card does not cancel the EMI attached to it. Any outstanding amount remains a repayment obligation and, depending on the issuer’s terms, may continue through a repayment arrangement or become payable along with applicable charges. Consumers should ideally close a card only after clearing all EMIs, unbilled transactions and dues, and obtaining formal closure confirmation. A clean credit card exit is not about simply closing the account, but ensuring no financial obligation is left behind,” Sehwani noted.
Siddharth Mehta, Co-founder & COO, Kiwi, said, “Cancelling a credit card doesn’t mean the outstanding EMIs get cancelled along with it. If a transaction has been converted into an EMI, the repayment obligation continues even after the card is closed, until the full amount is repaid. Depending on the issuer and the terms of the EMI, consumers may have the option to foreclose the outstanding amount, though this could come with applicable charges. That’s why it’s worth checking the outstanding balance and EMI terms carefully before cancelling a card. Consumers should also make sure there are no pending dues, since missed payments can end up affecting their credit profile.”
Clear dues before credit card closure
Ashish Lath, Founder & CEO, SaveSage, adds, “Cancelling your card doesn’t cancel your EMI – it’s still a loan you owe. RBI rules say banks have to close a card within seven working days, but only once all your dues are paid, and your EMI counts as a due. So the bank can simply refuse to close the card until you clear or foreclose it.”
Before proceeding with the cancellation process of your credit card, you should check outstanding EMIs, pending obligations and other dues. You should also be clear on the closure charges, processing fees (if any), and other aspects.
Clearing these obligations and obtaining formal confirmation of closure via the email address registered with the credit card issuing institution and your phone is a must, as it can help ensure that closing the credit card does not create new financial or credit-related complications.
