Credit cards are one of the most widely used financial instruments in today’s world, and they have found their way into almost every wallet and pocket, not just in the UAE, but worldwide. Credit cards, when used correctly, can be a wonderful financial tool, allowing users to properly manage their costs while also earning benefits.
Credit cards are versatile because they can be used to make online payments as well as transactions in stores, restaurants, and retail outlets.
Despite the numerous benefits, many people are afraid of credit cards and refuse to use them.To begin, we’ll look at the advantages of cancelling a credit card and how it affects your finances and credit score.
- Helps to Avoid Debt Traps
One of the most common reasons for credit card users to close their accounts is the accumulation of debt as a result of reckless usage. To understand this, it is critical to understand the user’s mentality. When a cardholder has a high credit limit, they are more likely to overspend, resulting in debt accumulation.
This debt accumulates over time, creating a vicious financial trap from which there is no way out. The main benefit of cancelling a credit card is that it prevents users from succumbing to the temptation of overspending and becoming imprisoned in debt.
- Identity theft and cybercrime are prevented.
The frequency of cybercrimes and identity thefts that leave victims insolvent has increased as technology has advanced. Many people believe that if they use multiple credit cards, hackers will have a more difficult time gaining access to their bank accounts or credit cards. However, the risk of becoming a victim of cybercrime/identity theft is the same regardless of how many credit cards one has. Closing your credit card would remove this risk while also saving you time and trouble.Spend less money
As previously stated, many people are unable to resist the desire to overspend, resulting in completely ruined budgets. However, if a person chooses to close their credit card, the possibility of overspending on available credit is eliminated, allowing them to save money.
- Spend less money
As previously stated, many people are unable to resist the desire to overspend, resulting in completely ruined budgets. However, if a person chooses to close their credit card, the possibility of overspending on available credit is eliminated, allowing them to save money.
- Consolidation of Debts
Many cardholders have multiple cards, which adds to the load on your financial portfolio by simply increasing the loan value. Using multiple credit cards on a regular basis to incur various debts will eventually result in an increase in your overall debt to income ratio. Divide your total debt by your total income to get your debt-to-income ratio. In theory, the DTI ratio is inversely proportional to the likelihood of receiving a loan approval. You can lower your debt-to-income ratio by cancelling your credit card, making it easier to obtain loans.
