According to financial experts, cancelling a credit card does not automatically cancel EMI obligations linked to card transactions. As reported by Mint, Nicky Sehwani, CBO at InstaMoney, explains that any outstanding amount remains a repayment obligation and may continue through repayment arrangements or become payable along with applicable charges. Siddharth Mehta, Co-founder & COO at Kiwi, adds that if a transaction has been converted into an EMI, the repayment obligation continues even after the card is closed, until the full amount is repaid. This warning is particularly relevant as CA Nitin Kaushak has warned that "no cost EMIs" can keep the Indian middle class permanently broke by encouraging lifestyle upgrades through debt. The latest analysis from FREED India reveals that paying only the minimum due on a credit card means 90-95% of the outstanding balance continues to carry forward at full interest, typically 36-42% per year, effectively keeping the balance static or growing even as payments are made consistently. FREED India emphasizes that a balance that persists month after month, even if it fluctuates somewhat, is a concrete sign worth addressing directly, since it means interest is accruing continuously and the balance is not meaningfully shrinking despite payments being made consistently.
According to Mint reports, RBI rules mandate that banks close credit cards within seven working days, but only once all dues are paid. Ashish Lath, Founder & CEO at SaveSage, notes that EMI counts as a due under these regulations, meaning banks can refuse to close cards until outstanding amounts are cleared or foreclosed. Financial experts emphasize that consumers should ideally close cards only after clearing all EMIs, unbilled transactions, and dues, ensuring no financial obligation is left behind. The regulatory framework becomes crucial as Kaushik points out that retail debt has become so normalized that young professionals can end up sacrificing their financial flexibility for depreciating assets. FREED India warns that a balance that persists month after month, even if it fluctuates somewhat, is a concrete sign worth addressing directly, since it means interest is accruing continuously and the balance is not meaningfully shrinking despite payments being made consistently.
As reported by Mint, depending on the issuer and EMI terms, consumers may have the option to foreclose outstanding amounts, though this could come with applicable charges. Siddharth Mehta from Kiwi advises that consumers should carefully check outstanding balances and EMI terms before cancelling cards, since missed payments can affect their credit profile. Experts recommend obtaining formal closure confirmation via registered email and phone to avoid new financial or credit-related complications. Kaushik's simple rule: if you need to borrow for 36 months to buy a gadget, you cannot actually afford it, highlighting that affordability should not be judged solely by whether a monthly EMI fits within the current budget. FREED India emphasizes that the earlier a debt trap is recognized, the more options exist to interrupt it, with restructuring, balance transfers, and disciplined repayment becoming more effective before the situation becomes severe.
According to Mint reports, before proceeding with credit card cancellation, consumers should check outstanding EMIs, pending obligations, and other dues. Financial experts emphasize the importance of being clear on closure charges, processing fees, and other aspects. Ashish Lath from SaveSage notes that cancelling a card doesn't cancel the EMI - it's still a loan owed, highlighting the need for thorough due diligence before proceeding with closure. Kaushik warns that easy financing can blur the difference between being able to pay for something and being able to afford it, emphasizing that money committed to EMIs cannot simultaneously be used for savings, investments or other financial priorities. FREED India identifies specific early warning signs including credit utilization rising from 35% to 45% to 60% across consecutive months, difficulty tracking total debt across multiple accounts, and the psychological shift where optional spending becomes mentally categorized as necessary during financial strain. The analysis reveals that a single missed payment often feels disproportionately catastrophic in a developing debt trap, indicating the underlying financial cushion has already worn thin. FREED India emphasizes that difficulty answering the simple question of how many separate accounts you owe money on, and what the total across all of them is, is a meaningful sign - someone with well-managed accounts can usually answer this within seconds, while someone with a developing debt trap may struggle to calculate the combined total.
