Video Blog Post: When Should I Cancel My Credit Card?

by on October 17, 2011 · 35 comments

in American Express, Beginners Series, Capital One, Chase, Citi, Credit Cards, Video Blog Post

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One of the most frequently asked questions that I get is, “When do I cancel my credit cards?” I filmed a short video while recently at the Andaz West Hollywood to answer this question, however I’ll recap my thoughts below for those who don’t feel like watching. (Pardon the background music in the video – we had turned the speakers down, but the camera still picked up a good amount of background noise).

1) First assess each card to see if it’s worth retaining it. I generally look for two things from my cards:
a) Perks – do I get value out of perks, like lounge access
b) Points – Am I accruing valuable and flexible points that I can use on multiple alliances? Furthermore, am I earning at good ratios – for example the Sapphire Preferred gives two points per dollar spent on travel and dining and the Amex Premier Rewards gives 3x on airfare and 2x on gas and groceries. See this post on maximizing category spend bonuses.

I generally don’t like canceling cards because it can hurt your credit score because your FICO score is based a mix of many different factors and available credit and average age of accounts are two of them. However, your score isn’t going to get ruined forever for closing accounts and it certainly doesn’t make sense to pay hefty annual fees for numerous cards. If you decide you no longer want a card, here are some tips:
1) Call and let them know you want to cancel, but you’ll keep it open if they waive the annual fee. Some credit card companies (like Citi) have retention teams that will waive annual fees or give big bonuses to keep you as a cardholder. Chase and Amex are less lenient with waiving annual fees, but it never hurts to ask.
2) If they refuse to waive the annual fee, try to downgrade to a card that has no annual fee. FYI most card companies will prorate the annual fee when you cancel the card.
3) If you can’t do either of the above options, just close the account - it’s not the end of the world. However, don’t close a ton of accounts in one month because you don’t want red flags to be raised or your FICO score to shift drastically. Make sure you use/transfer all of your points before you cancel a card. I’d also recommend waiting at least 6 months to cancel a card because the card companies can technically take your miles back if you cancel right away, though it’s rare. It’s better to be safe than sorry.

Disclaimer: The responses 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.

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  • Anonymous

    “try to downgrade to a card that has no annual fee”

    How does one downgrade from “annual fee” version
    if one already has “no annual fee” version?

  • Mary K. Darrah

    when i opened my Chase Sapphire Preferred, since I already had 3 Chase Continental cards, I tried to cancel one. They told me they would take back the miles if they were not used in 18 months…….Very confusing since i don’t know which miles came from which card……so I kept them all…….

  • Anonymous

    If you have a card that has no annual fees, why would you want to close it? I’d keep it open and then shift the credit line to another card in the future. Closing it will just negatively hurt your credit score for no real reason

  • Anonymous

    The rep was talking about United’s new policy of expiring miles- not Chase taking them back for closing a card. Its very easy to keep miles active- all you need to do is buy a single itunes song and the entire clock gets reset for another 18 months.

  • Anonymous

    Clarification, I have both:
    a. annual fee Capitol One, recently for the bonus
    b. no annual fee Capitol One for years

    Can I downgrade (a) into pre-existing (b) to avoid credit rating smear?
    I don’t want to close (b).

  • Fjr44

    I have 5 chase cards…amazon(no fee), priority club(no fee), freedom, saphire preferred. I would like to have the Hyatt also but do not know if there is a max for how many chase cards u can have? should i close the amazon to free up for anothe rcard?

  • Jamison

    great video! rooftop pool of the andaz?

  • Michael

    Great video blog! Love to see more of them.

  • greek2me

    Brian- You might want to edit this post to add another reason to cancel a credit card is to start the clock running on the time that must pass before you can reapply for that card (and the sign up bonus) again in the future.

  • ArlingtonMiles

    I have a a old Amex Gold charge card (the Rewards Plus which was replacced by the Premier Rewards) and I’m seriously thinking about cancelling after having had it for over five years. The elimination of double miles for gas and groceries (which was technically a pomotion but always in effect until after the Premier Rewards card was rolled out) was eliminated. The thing with Amex is I don’t think they do much to retain you because they make most of their profit on charge cards from annual fees since people do pay them off every month.

    Thanks to TPG I know the Saphhire Preferred card from Chase offers not just a servicable alternative to an Amex Gold card but a pretty good one at that.

  • Patrick

    Is there a downside in just not using the card? (assuming it is a no fee card).

  • Steve Boyko

    Good post… I have a couple of cards that I got for the sign-up bonus and the annual fee was waived for the first year. I’ve done the spends required and I do intend on closing them before the year is up. Nice to know there might be a chance to get the fee waived.

  • Keith

    Great timing on the post, TPG! I’ve had a Delta Platinum AmEx for 2 years that renews in about a week @$150 and have hit my spending threshold, so I dont’ really care if I have the card or not anymore–it makes the “I’m going cancel” chicken game a little more fun.

    My question follows greek2me’s post. I have been exploring my options with switching to the Delta Reserve for the MQMs and was told that an upgrade actually accrues 5000 MQMs, versus the posted 10000 MQM for a new customer. Are there typically waiting periods to move within airline card groups–Delta [Gold, Platinum, Reserve] AmEx–as there would be to cancel and re-open the same card (Delta Platinum–> Delta Platinum) in order to accrue “new member” benefits?

    Will report back if anything interesting unfolds.

  • Anonymous

    They often offer tiny bonuses to upgrade. The workaround? Simply apply for the lucrative new cardmember bonus and then cancel/ switch your old card. You may get an inquiry on your credit, but it could be worth it to get the better bonus.

  • PJ

    not to worry try for it if they sit on it or deny you call them up to allocate credit from one account to the other i got hyatt and Southewest on one call. they took credit out of my freedom and BA to make rooms for it.. you can even say I am going to Paris for my 25th wedding anniversity would be very nice if I can get to try to get in one of the most impressive if not the mots impressive Hyatt in the world etc etc..

  • Anonymous

    I’ve been focusing more on hotel programs lately so have been using my Starwood Amex and and my Priority Club Visa. I love those Priority Club Points Breaks hotels and points plus cash deals in both programs.

  • Gary R

    Great topic and good info. I primarily use my American Express which we got through Costco. We shop a lot at Costco and they only take AMX. It’s got 1% cash back on most purchases and a bit more on gas. I guessing that I can’t add Membership Rewards to it though. For other use (where AMX isn’t accepted) I’ve stuck with the Marriott Visa. It’s an annual fee card and the fee will go up quite a bit this year so as suggested I’m evaluating if it makes sense to stick with it.

  • Sletzyroo

    Are there any down sides to cancelling one credit card, and then immediately opening a new credit card with a different airline/company?

  • Abby

    Thanks for this helpful post, Brian — I’m one of your many readers who will be looking to downgrade or cancel cards next year after signing on for these huge bonuses.

    One thing I’m unclear on — can you downgrade to any no-fee card from the same issuer? For example, I signed up for the 2x Citi AA cards in August, and I’d really like to “downgrade” one of them to the no-fee Citi Forward Visa (which offers 5% back on dining and before the annual fee is due so that I can help lengthen my average account history. Is that possible, or does a downgrade have to be to a card of the rewards program? Similarly, following the BA devaluation, I have no interest in paying a few on the Chase BA, but since I’m still young and building account length, I’d love to convert to the no-fee Chase Freedom or similar.

    Since neither of those no-fee cards offers amazing bonuses, I don’t feel like I’d be missing out by downgrading rather than signing up fresh, and the potential benefit to my credit score/history of converting to cards I can keep free forever seems like a good trade.

  • Abby

    Sorry, meant to say “does a downgrade have to be to a card in the *same* rewards program” as the original? Ie, one AA card must downgrade to another AA card, versus downgrading a Citi AA Visa to a no-fee Citi Forward Visa in a points/cash program.

  • Micedp

    Great video
    Thanks you brought up some great points!

  • R-info

    When you say “Make sure you use/transfer all of your points before you cancel a card,” I am confused. I thought you had to use all the amex/UR/thankyou points if you’re gonna cancel, but that airline miles were OK – that once they’re in my frequent flyer account, they’re mine, even if I cancel the card. Am I mistaken about that?

  • Anonymous

    Correct- once they are transferred and into your account they are fine. Same with airline mile cards- once they post to your frequent flyer account they are yours barring any illegal activity

  • R-info

    So ThankYou points and Amex points are mine to keep too, even if I cancel the card? thanks!

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  • Jeff

    I’m cancelling my 2 cards I got in the bonus last year. Don’t want to pay the 85.00. They did offer 25.00 credit and an extra 2 miles per purchase for 6 months. Since I’ve reached my limits on other cards I’m wondering if it makes sense to cancel 1 of the cards and take them up on the offer on the other. 60 annual fee for 3 to 1 miles for 6 months. If it’s my go to card during this time don’t see how I couldn’t rake up a trip. Thougts?

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  • Nam

    To my experience, I used to have a no fee card from Barclay, and didn’t charge a single cent on that card since the day I received it, because I attempted to finance a purchase on Apple. Several months later Barclay closed the account due to inactivity.

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