Bank delays credit card closure? Know your rights — Here's how to claim ₹500/day compensation

Closing an unused credit card should take minutes, but somehow, cardholders find themselves trapped in an endless loop of unhelpful customer service bots, persistent retention calls, and unfulfilled cancellation tickets.

Many simply give up, assuming an inactive card tucked away in a drawer is harmless. However, ignoring a languishing account can lead to surprise annual fees, sudden drops in credit score, and administrative headaches.

Under the Reserve Bank of India’s (RBI) guidelines, banks face strict deadlines to act, and failing to do so can result in substantial penalties paid directly to the consumer.

The severity of the mandate was realised recently when a bank was directed to compensate a cardholder ₹3.21 lakh after sitting on an account closure request for months.

The customer had cleared all outstanding dues and formally submitted a cancellation request. Despite multiple follow-ups, the bank failed to close the account, allowing the issue to fester for hundreds of days.

The compensation was calculated strictly using the RBI’s mandated formula: a statutory penalty of ₹500 per day of delay, paid to the customer until the card was formally terminated.

Therefore, for a consumer, knowing the rule helps turn a prolonged grievance into an enforceable claim against the lender.

What are the RBI rules for closing a credit card?

Under the RBI’s Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022, the central bank laid down clear operational guardrails to stop banks from stalling account closures:

• Strict 7-day turnaround: A card issuer must complete the closure of a credit card within seven working days of receiving a valid request from the cardholder, subject to the settlement of all outstanding dues.
• Daily compensation: If the bank fails to close the card within this 7-day window, it is liable to pay a penalty of ₹500 per day of delay, payable directly to the customer, until the account is formally closed.
• Multiple channels of accessibility: Banks cannot force customers to visit physical branches or write physical letters. They must provide accessible closure options across mobile apps, online banking, email, IVR, and SMS.
• Instant closure intimation: The bank must immediately notify the cardholder via SMS or email once the card is closed.

How to claim compensation?

If you are looking to close a credit card, following a disciplined paper trail ensures you remain legally protected:

• Clear all dues: Ensure the outstanding balance reads zero. Check for any pending EMIs, unbilled charges, or auto-debits linked to the card.
• Submit requests via written/digital channels: Avoid informal verbal requests. Use net banking, the official mobile banking app, or the lender's designated grievance email to obtain an immutable date-stamped acknowledgement and ticket number.
• Redeem reward points promptly: Card issuers are mandated to give cardholders a 30-day window to redeem available reward points upon closure.
• Escalate after Day 7: If day eight arrives and the account remains active, write to the bank’s Principal Nodal Officer, citing the ticket number and the RBI Master Direction clause.
• Approach the RBI Ombudsman: If the bank fails to resolve the issue or credit the ₹500-per-day penalty within 30 days of escalation, file a complaint on the RBI’s Complaint Management System portal — cms.rbi.org.in.