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TPG reader Benjamin had a question about credit card sign-up bonuses and spending:
“After you fulfill the bonus requirements for a card, do you continue to use the cards, or do you set them aside to work on fulfilling your other card requirements? I’ve been simply putting them in the drawer after I know they’re completed, but wanted to know is there anything negative that happens when you don’t use the card?”
I stop spending on a credit card when it just no longer makes sense. For example, the Chase Hyatt Credit Card comes with two free nights when you spend $1,000 within 3 months of opening the card, and as a Diamond member, those two free nights are in suites. However, the card itself doesn’t really offer great day-to-day spending power.
I’d rather put spending on my Chase Sapphire Preferred and earn 2X points on travel and dining because those Ultimate Rewards points I earn are much more flexible, and can be converted to Hyatt points if that’s what I end up deciding to use them on anyway.
However, I am going to keep my Hyatt card open in perpetuity because one of its other benefits is one free night at a Category 1-4 hotel Hyatt property each year I have the card open, which is easily much more valuable than the $75 annual fee I pay on the card.
So even though I’m not spending on the credit card and it remains on my credit report, it doesn’t negatively impact my score. In fact, it actually helps in a way because if you’ve got a lot of available credit but you’re not using a huge amount of it, your debt-to-credit ratio is low, which raises your credit score since credit utilization and paying your bills on time are the two biggest factors in determining your credit score.
There are some credit issuers that will shut down accounts if they are dormant for too long, so it’s a good idea to put a small purchase on the card every so often just to keep it active.
The other thing to keep in mind is: is your card giving you more in value by hanging onto it than the annual fee is costing you? With the Hyatt card, that’s a clear yes, but if the answer for the card or cards you’re considering is not so clear, or just a flat-out no, then maybe you should consider closing it.
Before you do, though, it’s worth calling up the bank and seeing if they will waive the annual fee or give you some other sort of perk that makes the annual fee worth it, like a points bonus.
So focus on meeting your minimum spending first to secure those great credit card bonuses since you don’t want to fall short on those, then set a strategy for your credit card spending so that every single dollar and every single credit card earns you some value.
For ideas on how to meet minimum spend, check out this post, and then here’s a great post on Maximizing Travel Credit Cards’ Calendar Year Spending Threshold Bonuses and Perks and posts on how to maximize your spend on various kinds of purchases:
Getting the Most Points Out Of Double and Triple Dipping When Booking Travel
Choosing the Best Credit Cards and Sites for Booking Airfare
Choosing the Best Credit Cards and Sites For Booking Hotel Stays
Earning the Most Miles and Points on Car Rentals
Earning the Most Miles and Points on Gas Purchases
The Best Ways to Earn Points on Dining