5 times you should cancel your rewards-earning credit card
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Editor’s note: This post has been updated. It was originally published on Apr. 8, 2015.
I write pretty often about applying for and using rewards earning credit cards, but there is sometimes another important step in that process that doesn’t get as much attention…canceling 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 canceling certain cards and accounts when it no longer makes sense to keep them.
Here are five times when you should strongly consider canceling 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 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 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 1 – 2 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 night 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 airline companion 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 offered more than offset the annual fee.
For some cards, like the IHG Rewards Club Premier Credit Card that gives an annual reward night (worth up to 40,000 points) at an IHG property or the Radisson Rewards Premier Rewards Visa Signature Card card, which provides 40,000 points annually, it is often easy to justify the annual fee (provided you use those perks). However, for cards that offer less return on an annual basis, it can be much harder to justify paying the fees year after year.
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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, Chase Ultimate Rewards cards like the Chase Sapphire Preferred Card earns transferable points you can use via World of Hyatt, United MileagePlus, Southwest Rapid Rewards and more. It doesn’t really have any built-in annual perks to speak of, but the rewards it earns are so valuable that 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 canceling the card. You’ll 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 perk or reward 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 World Elite™ Mastercard® from when the 100,000 mile bonuses were being offered in 2014 (which are no longer available). The card is currently offering a welcome bonus of 50,000 bonus miles after spending $5,000 on purchases in the first three months of account opening.
That card comes with Admiral’s Club access, which is probably valuable to some travelers. But it likely won’t make sense to keep 2-3 of these cards, since the annual fee is several hundred dollars per year. Heck, if you don’t really use or value Admiral’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 of different AAdvantage cards, maybe even offered by different banks. In an effort to streamline your rewards card collection, it might make sense to drop down to only one card per rewards program.
This can also happen if you had a rewards card primarily for elite-type perks it awards, only to find yourself actually earning that particular elite status the old-fashioned way. It 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 welcome bonus “once in a lifetime.” Others are a bit more generous and will give you the welcome bonus again in the future either after a prescribed time like 48 months, or on a more flexible basis.
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 you won’t be able to obtain a second card unless you’ve canceled the first.
Reason #5 to Cancel a Rewards Credit Card: When You Want a Different Card
The last rewards credit card I canceled was a very good card. But I wasn’t going to qualify for any additional credit cards with that particular bank if I kept it open, as I had hit my “limit” of extended credit. In order to get another card I wanted, I had to cancel one of my other accounts. So I chose to cancel the account I wanted the least.
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.
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?