Many UAE residents wonder whether they should keep all their credit cards active or consider closing credit card accounts they rarely use. While the decision might seem straightforward, several factors deserve consideration before you make your choice.
Impact on Your Credit History
Your credit history plays a vital role in financial decisions throughout your life. When you contemplate closing a credit card, you must consider how this action affects your credit profile.
Credit history length represents an important factor in your credit assessment. Older accounts demonstrate your long-term ability to manage credit responsibly. For UAE residents, maintaining older accounts can prove beneficial when applying for financing options like mortgages or auto loans. By closing credit card accounts that you’ve held for many years, you might inadvertently shorten your credit history, particularly if they rank among your oldest accounts.
Benefits of Closing Unused Credit Cards
Despite potential credit score implications, valid reasons exist for closing credit card accounts.
- Annual fees represent a primary consideration. Many premium UAE credit cards charge yearly fees ranging from AED 500 to several thousand dirhams. If the card benefits no longer justify this expense, closing a credit card eliminates unnecessary costs.
- Managing multiple cards can also prove challenging. Each card requires monitoring for fraudulent activities, remembering payment due dates, and tracking rewards programs. By reducing your card portfolio, you simplify your financial management and potentially decrease the risk of missed payments that damage your credit profile.
When Does Closing a Credit Card Make Sense?
Several situations warrant consideration for card closure:
- High annual fees that outweigh benefits represent an obvious reason. For example, if you pay AED 1,500 annually for a premium travel card but rarely utilize its airport lounge access or travel insurance benefits, keeping the card makes little financial sense.
- Significant changes in spending patterns might also justify card closures. A dedicated airline credit card loses its value when you no longer fly with that carrier. Similarly, retail-specific cards become unnecessary when shopping habits change.
Alternatives to Closing Credit Cards
Before closing a credit card, consider alternatives that preserve credit history benefits while addressing concerns.
- For cards with annual fees, requesting a downgrade to a no-fee version allows you to maintain the account history without ongoing costs.
- Many UAE banks offer multiple card tiers within the same product family, making downgrades relatively straightforward.
How to Close a Credit Card Safely and Effectively
If you decide that closing a credit card aligns with your financial goals, follow proper procedures to minimize the negative effects of closing credit cards.
- First, redeem any outstanding rewards points, cashback, or miles—these typically disappear upon account closure.
- Monitor your credit report after closure to ensure accurate reporting of the closed account status. UAE residents can request credit reports from the Al Etihad Credit Bureau to verify proper documentation.
The decision about closing credit card accounts requires weighing multiple factors against your financial situation and goals. Consider both immediate implications and long-term effects before making your choice.
Not sure whether closing a credit card is the right step for your financial health? Let Lin International help you assess your options with clarity and confidence.
