With the end of the 2025 financial year approaching, a significant number of Indians are doing “financial resets. These include organizing their subscriptions and closing their less-used credit cards. This may seem like just a routine administrative matter. However, it is banking experts who put out a warning that closing a credit card, especially one that is old, can mistakenly harm your credit health, and that too right when you are entering the new year.
The Hidden Cost of Losing Your Oldest Account
Among the various risks associated with the closure of a credit card, one of the most immediate and significant ones is the decline in your Average Credit Age. The credit bureaus highly value long-standing accounts because they signify reliability and a proven track record. Therefore, if you cancel your oldest card, your credit history might suddenly seem “younger, hence, possibly making you appear less established to lenders. Keeping a card that is used very rarely active through a small and infrequent transaction is, according to finance specialists, a wise strategy to support the base of your credit profile.
Impact on Credit Utilisation and Risk Perception
In addition to being aged, the closure of the card will also result in the instant reduction of your total available credit limit to all lenders by a huge amount. So, in case your month-to-month spending remains the same, your Credit Utilisation Ratio, which is the percentage of the available credit that you actually use, will go up drastically. A higher ratio is often interpreted by banks as a sign of financial stress or heavy reliance on credit, which can lower your score. A lot of consumers are very much mistaken to think that their ratings have not been affected,d even when they have never missed a payment, not just because they have closed an account and reduced their “safety buffer”.
Strategic Portfolio Management for 2026
Although it is usually recommended to keep all cards active, experts indicate that closing a card is not necessarily a bad decision. When a card has high yearly fees without any or very few benefits, it tends to no longer be worth it. However, the Sequencing of Closure is critical. Make sure all dues have been paid, and your pending and older accounts are still active. For the ones who will be applying for a mortgage or auto loan in early 2026, it’s much better to have a diverse and stable credit mix than to conduct a reflexive clean-up of your wallet.