5 Times You Should Cancel Your Rewards Earning Credit Card

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I write pretty often about getting and using rewards earning credit cards, but there is sometimes another important step in that process that doesn’t get as much attention…cancelling the cards you no longer need.  This process isn’t quite as fun as getting a new shiny card with a nice juicy sign-up bonus, but if you want to maximize your rewards and/or be in this game for the long-haul you cannot neglect cancelling certain cards and accounts when it no longer makes sense to keep them.

When to Cancel a Rewards Credit CardHere are five times that you should strongly consider cancelling a rewards credit card.  Note that there can always be extenuating circumstances that make it a good idea to keep a particular card even when the situations below are present, so obviously think through your situation carefully before deciding whether to keep or dump each card.

Reason #1 to Cancel a Rewards Credit Card: When the Cost Outweighs the Perks:

Most rewards earning credit cards have some built-in perks or annual bonuses that help make the annual fees a bit more palatable.  This is in addition to the typical 1x – 2x miles/points per dollar that the card earns when you use it for your everyday purchases.  The built-in perks my be free checked bags, priority boarding, elite status, a $99 annual companion airline certificate, a bundle of annual miles or points, lounge access, or even a free hotel room each year.

These perks can be very valuable, but they are only as valuable as how often you are using them.  If you never go to the airport lounge, throw away your companion airline certificates, and let your annual hotel award nights expire (shame on you!) then their value to others is irrelevant.  Look at the annual fee for each rewards credit card that you have and be sure that the perks it is providing to you and your family more than offset the cost of that annual fee.

For some cards, like the IHG® Rewards Club Select Credit Card that gives an annual free night at an IHG property or the Club Carlson Premier Rewards Visa Signature® Card card that gives 40,000 points annually, it is often easy to justify the annual fee (provided you use those perks), but for cards that offer less return on an annual basis it can be much harder to keep paying the fees year after year.

Reason #2 to Cancel a Rewards Credit Card:  When You Just Aren’t Using It:

Some cards are light on the built-in perks, but offer very good rewards for using the card.  For example, the Chase Ultimate Rewards cards like the Chase Sapphire Preferred® Card that earns transferable points you can use via Hyatt Gold Passport, United, Southwest, and more doesn’t really have any built-in annual perks to speak of, but the rewards it earns are so valuable it can be worth keeping anyway…but only if you are actually using the card.

If you have a rewards earning credit card that doesn’t really have built-in perks you are utilizing, and you aren’t using it for everyday spending in order to earn points, then it is probably time to consider cancelling the card in order to save on annual fees and have one less thing to keep track of.

Reason #3 to Cancel a Rewards Credit Card: When the Perks or Rewards are Duplicated Elsewhere:

A credit card may have a pretty good ongoing perks or rewards system, but if you have multiples of that same card, or other similar cards, then it may not make sense to keep all of them indefinitely.  For example, I know some people have multiple Citi AAdvantage Executive cards from when the 100,000 mile bonuses were being offered in 2014.  That card comes with AAdmiral’s Club access which is probably valuable to some travelers, but it likely won’t make sense to keep 2-3 of these cards each since the annual fee is several hundred dollars per year.  Heck, if you don’t really use or value AAdmiral’s Club access then it may not make sense to keep any of the cards (see reason #1 above).

Alternatively, you may find that you have a couple different Hilton HHonors cards, maybe even offered by different banks, and in an effort to streamline your rewards card collection it might make sense to drop down to only one card you hold onto per program.  This can also happen if you had a rewards card primarily for the elite or elite-like perks that it awards only to find yourself actually earning that particular elite status the old-fashioned way in the future.  It may or may not make sense to continue holding on to that card once the perks are duplicated elsewhere.

Reason #4 to Cancel a Rewards Credit Card: When You Want to Get the Card Again in the Future

Many credit cards these days only award the sign-up bonus “once in a lifetime” (ahem, Amex), however some others are a bit more generous and will give you the sign-up bonus again in the future either after a prescribed time like 24 months, or on a more flexible basis (ahem, Bank of America).  If you are on the fence about keeping a rewards credit card, a good tie-breaking decision might be whether you want to try to get the card (and bonus) again in the future.  Sometimes you can still have the first card even if you want a second, but other times it helps to no longer have the particular card you might want to get again in the future.

Reason #5 to Cancel a Rewards Credit Card: When You Want a Different Card

The last rewards credit card I cancelled was a very good card, but I simply wasn’t going to be offered any additional accounts/credit with a particular bank with it open as I had hit my “limit” of extended credit.  In order to get another account I wanted approved I had to cancel one of my other accounts, so I selected the account I wanted the least to be the one closed.  Some do this proactively knowing they probably won’t get approved for an additional account based on prior experience, and some wait until they are told by the bank they can’t have another account unless they take credit from or close another credit account with that bank.

Bonus Tip on When to Cancel:

A good time to consider dumping a card is around the time the annual fee is due each year.  When you call up the card issuer to cancel you will sometimes be given a “retention bonus offer” to keep the card open.  This may come in the form of a statement credit to offset the annual fee or perhaps some bonus points either as a “goodwill gesture” or that will be awarded after you spend a certain amount on the card.  Some issuers (like Citi) are often better about this than others, but it never hurts to ask if you are on the fence about closing the card, or you can just be pleasantly surprised at times with what is offered when you call to cancel.  Be aware that sometimes when you call to cancel the deed is done very quickly and without any offer to keep the account open, so don’t make that call unless you really are prepared to cancel.

Thinking carefully about what cards to keep and what cards to cancel is a very important part of a healthy miles and points strategy.  How do you decide which rewards credit cards to keep for the long-haul?

Editorial Note: The opinions expressed here are mine and not provided, reviewed, by any bank, card issuer, or other company unless otherwise stated.

Disclaimer: The comments below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

Comments

  1. I have a few thoughts about, “Reason #4 to Cancel a Rewards Credit Card: When You Want to Get the Card Again in the Future”. In my understanding of this hobby, and I’ve been only doing it for one year, it’s that you always cancel cards so that you get the bonus again. If it’s one of those cards that you can’t get again, still, go ahead and cancel it because, at least in my case, I only have a very limited income that I spend on credit cards and I use it go meet minimum spendings. That means, I’m ALWAYS working on minimum spending, so why keep those cards that I can’t use anyway? I would like to see a post that list of those banks that don’t give you a second chance. I think I see those cards named here and there on different blogs but I’m not sure if I’ve seen one with all of them and comments on people’s experiences.

    When you say “Sometimes you can still have the first card even if you want a second”, do you mean you can have a card and get the same exact card and have them both open? and get the bonus again for the second?

    Thanks for the info, as usual.

  2. Hey Summer. Sort of related to this post. I called us bank regarding the 30k bonus for booking an eligible stay and they said they see it nowhere in their current offers. I didnt get it in my email along with the notice of benefit change either. Im gonna cancel if i cant take advantage of this offer as i have till end of month to cancel before AF. Is this something i need to call club carlson regarding? Just strange as promo seems to b tied to the credit card so us bank reps should know and see it. How can I verify Im eligible for this offer? Any help is much appreciated by anyone in the know

    • JB, My email came from Club Carlson not US Bank -subject title “Information regarding your Club Carlson Visa Benefits” – I would give Club Carlson a call…..And, to thank you for your continued loyalty, you can earn 30,000 bonus Gold Points® on your next Eligible Stay at a Carlson Rezidor hotel worldwide when you pay with your Club CarlsonSM Visa®. Offer ends August 31, 2015. Terms and conditions apply.*

  3. Hi!
    Regarding your Bonus Tip: do you ever transfer your line of credit to another card managed by that financial institution? Or, do you simply cancel cards outright? Just curious if there was a particular strategy you’d recommend. Thanks!

  4. Regarding tip #2: Keeping the card even though you don’t use it might also work in your favor. I keep the Amex Hilton card even though I nearly never use it. It allows me to have a continuously ongoing account with Amex via a card with no annual fee.

    Another consideration about cancelling/not cancelling is patterns that you may create. If I’m not mistaken, Chase recently ‘gently warned’ card churners that if you just get their cards for the signup rewards and then not use them for anything else, you could jeopardize your credit relationship with them. So even cards I don’t value very much do get the occasional small activity.

    • Agree there can always be extenuating reasons to keep a card. I use most of the cards I get at least periodically while I have them and I keep most longer than a year, but I also only get a handful a year.

  5. I have a Citi AA card and a USAir Barclay card. The US card is going to be converted to an Aviator Red card, leaving me with 2 AA cards with annual fees. The Barclay card doesn’t charge international exchange fees, but I have a Hyatt card that covers that as well. Any suggestions as to which AA card to keep?

    • Sandi, depends in part if your US Airways card gave the 10k anniversary miles…I would keep that for sure if it did.

    • MP alluded to this at the end of the post, but I would start by calling Citi and telling them that you’re thinking about cancelling because of the annual fee (“but I’d be willing to consider a retention offer”) when it gets close to the annual fee hitting. Sometimes, in addition to giving a statement credit that offsets the annual fee, they will also give you bonus miles (e.g., 1000 extra miles every month you spend at least $1000). I have yet to pay an annual fee on five renewals of Citi AA cards. As MP said, I’d hold on to the Barclay’s card if it gives 10K points at anniversary. It looks like some folks on flyertalk are getting their AFs waived on the Barclay’s card as well, although I’ve never tried (I have two cards with the 10K mile anniversary bonus, I’m OK with paying $89 for that!)

      • I wish Barclay’s would waive the AF or give me 10K bonus points. I’ve had the US Airways card for about 8 years now and have always used the companion certificates, which sort of offsets the fee, but never bothered to apply for a second card. Seems like a lot of people have been getting their AF waived like Grover’s Bathtub states but unfortunately i’ve not been one of them. Only reason I hang on to that old card is for the longevity on my credit report. Should I worry about the hit I’d take by closing this card and applying for a new one?

        Cheers!

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