Merits and Demerits of Closing a Credit Card in UAE

By Pratima Singh
  | Published: 19 May 2021

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Credit cards are one of the most sought financial tools in today’s era and have managed to make their way into almost every wallet and pocket not just in the UAE but across the globe. Credit cards turn out to be an excellent financial tool if used wisely; they allow users to manage their expenses efficiently and earn rewards at the same time.

Apart from making transactions at stores, restaurants, and shopping outlets credit cards can be used to make online payments as well which makes it flexible at the same time. However, even with so many benefits a lot of people are dreaded of credit cards and stay away from them.

In reality, users need to understand that a credit card at the end of the day is a financial tool at its usability is completely dependent on the skills of the user just like any other tool. With the right knowledge and skill, the users can make the best out of this tool. In case you’re unable to manage credit cards it is recommended that you get them closed to avoid getting trapped in a vicious debt.

Before you go ahead and close your credit card it is extremely vital to be aware of the merits and demerits associated with closing a credit card. To provide you detailed insight and make sure you’re aware of all the repercussions associate we’ve come up with a new blog.

Merits of Closing a Credit Card

To begin with, we’ll take a look at the merits of closing a credit card and how does it impact your financial well-being and credit score.

Helps to Stay away from Debt Traps

One of the most common issues encountered by credit card users that provoke them to close their credit cards is the accumulation of debt due to irresponsible usage. In order to understand this, it is crucial to understand the psyche of a user. When a cardholder has a credit card with a decent credit limit they are tempted to spend unnecessarily which leads to the accumulation of debt. Gradually, this debt keeps on adding and results in the creation of a vicious debt trap that is quite difficult to escape. The primary benefit of closing a credit card is that it allows users to stay away from the temptation of spending unnecessarily which in turn saves them from getting trapped in debts.

Amazon Voucher on credit card

Prevents Cyber Crime and Identity Theft

With technological advancements, there has been a rise in the number of cybercrimes and identity thefts that leave the victim bankrupt. Many users have a misconception that if they use multiple credit cards it would hard for hackers to slip into their bank accounts/credit cards. However, in reality regardless of the number of credit cards, one uses the probability of being a victim of cybercrime/identity theft is equal. Closing your credit card would eliminate this probability and save you from turmoil.

Save Money

As mentioned earlier, a lot of people are unable to resist the temptation to overspend and in turn, completely wreck their budgets. However, if one chooses to close their credit card the scope of overspending from available credit is eliminated which allows them to save money.

Debt Reduction

Several cardholders use multiple cards, which adds a burden over your financial portfolio by simply increasing the debt value. Regular use of multiple credit cards to incur different debts would eventually lead to an increase in your overall debt to income ratio. The debt to income ratio is defined as the debt you owe against your total income. Technically, the DTI ratio is inversely proportional to the probability of qualifying for a loan. By closing your credit card you can reduce the debt to income ratio which would help you to avail loans easily.

Also Read - How to Properly Cancel a Credit Card in Dubai

Demerits of Closing Credit Card 

It is a well-known fact that every coin has two faces, and so is the case of closing a credit card. In this section, we will talk about the demerits of closing a credit card.

Reduced Credit Timeline

Authorities that calculate your credit score, closely observe the timeline exposure of credit cards. When you close a credit card you’re eventually lessening your overall history of credit which in turn affects your credit rating and score to drop drastically.

Reduced Credit Score

As mentioned, due to shortened exposure of credit timeline the credit score of the user tends to drop after closing their credit card.

Discount offers on Credit

Reduced Credit Limit

The total available credit limit of a user would be referred to as the sum of individual credit limits of different cards. When a cardholder closes one of its credit cards then the overall credit limit is reduced which in turn eliminates the scope of enjoying other benefits such as cashback, rewards, and loyalty points.

The Final Verdict

Credit cards are the ultimate tool provided that the user has the right knowledge to use them. Based on the above pros and cons of closing a credit card you can decide and choose the right option for you based on your situation.


Pratima Singh
Pratima Singh10 Posts

Editor | This is me saying HEY! from behind the screen you're staring into. I am a pop culture junkie who derives pleasure in writing fresh, informative, and fun content.