New Delhi, May 4 -- Credit cards are flexible instruments for short-term borrowing that have among the highest interest rates. The big benefit with a credit card is that it helps build your credit score as you use it to simplify payments and gain rewards as benefits.

However, you may choose to close a credit card to manage unnecessary spending or avoid hefty fines and late payment fees. While it may seem like a straightforward financial decision, closing a credit card could have a big impact on your credit score and negatively impact your overall credit profile. It is thus important to have a proper plan when you want to close a credit card.

Credit utilisation ratio: Your credit utilisation ratio is a critical component that will take a...