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Here’s why you should never close your credit cards before the one-year mark

Sept. 07, 2021
7 min read
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Editor’s note: This post has been updated with new information.


One of the biggest mistakes I see people making when they begin their points-and-miles journey is to rapidly open tons of travel rewards credit cards without any plan for what they’re going to do with them. Some cards might entice you with a large welcome bonus and others will be long-term keepers, but it’s possible that after 11 months of using the card and experiencing its benefits, you might change your mind about it before the annual fee comes due.

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So then, is it OK to cancel a credit card before a first account anniversary?

This is one of the most common questions we receive, especially right now as people are still looking to minimize their out-of-pocket costs as they've felt the financial strain from the pandemic.

The answer is worth repeating loud and clear: Never, under any circumstances, should you close a credit card less than one year after opening it. There are many reasons why this is a bad idea, but let’s start with some of the consequences you might expect if you do this.

Travel rewards cards can help you achieve your wildest dreams. But there's some etiquette you should understand before diving in. (Photo courtesy of The Naka Island, a Luxury Collection Resort and Spa)

Why you should keep your credit cards open for more than a year

Here's the thing: There is nothing remotely illegal or even fishy about closing a credit card within 12 months of account opening. Many cards offer a waived annual fee the first year for this very reason. They want a consumer to try their card out with zero risk. If the customer doesn't like it or finds it does not serve their lifestyle, they can cancel the card, having lost nothing.

However, it doesn't really matter how pure your intentions are. If the bank suspects you're trying to take advantage of them (perhaps by opening a card just for the welcome offer), they may take action against you. As an example, let's look at the terms and conditions of the Delta SkyMiles® Platinum American Express Card. Nearly every Amex card contains similar language in their terms (emphasis mine):

"If we in our sole discretion determine that you have engaged in abuse, misuse, or gaming in connection with the welcome offer in any way or that you intend to do so (for example, if you applied for one or more cards to obtain a welcome offer (s) that we did not intend for you; if you cancel or downgrade your account within 12 months after acquiring it; or if you cancel or return purchases you made to meet the Threshold Amount), we may not credit the welcome offer to, we may freeze the welcome offer credited to, or we may take away the welcome offer from your account. We may also cancel this Card account and other Card accounts you may have with us."

There’s plenty of legalese in the terms and conditions of a credit card application, but if you’re wondering whether Amex is serious about this bit, I can tell you that they are. Over the last few years, we’ve seen countless crackdowns and points clawbacks for people trying to skirt the rules in various ways, including self-referring to Amex cards and abusing limited time bonus categories, to name a few.

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I've already spent my welcome offer — am I safe?

In the past, we’ve seen Amex take Membership Rewards balances into the negative when clawing back welcome offers that had already been spent. The terms are clear that you might face other disciplinary action, including the closure of your other Amex accounts. Simply put, this is not worth the risk.

I don't want to pay the annual fee again. What should I do?

There’s actually no reason to close a card early instead of waiting until the annual fee posts. Most issuers give you a grace period of ~30 days or so after the fee posts, during which you can get the fee refunded if you decide to cancel the card. Even if someone is 100% sure they’re going to close their card, they should wait until a week or so after the annual fee posts to do it.

Issuers discouraging the appearance of "gaming"

When I’m analyzing my Amex cards each year and deciding which ones to keep and which ones to close, there’s another factor I consider. Amex now includes a “welcome offer eligibility” checker that may pop up during your application and alert you that you’re ineligible to receive a welcome offer, even if on paper you’ve done everything right (you’ve never had that specific card before, etc.). You’ll find this alluded to in the card’s terms and conditions right above the line we just looked at (again, emphasis mine):

“Welcome offer not available to applicants who have or have had this Card. We may also consider the number of American Express Cards you have opened and closed as well as other factors in making a decision on your welcome offer eligibility.“

Amex and other issuers have clearly been making moves to discourage people who are opening credit cards just for the welcome offers and not growing into valuable long-term customers. While we don’t know exactly what Amex’s offer eligibility algorithm looks for, one common report we’ve heard is that people who close cards at the one-year mark (i.e., right after the annual fee posts) find themselves ineligible to apply for more Amex cards in the future.

This means that when I apply for an Amex card, I plan on keeping it for at least two years, even if I’m primarily interested in the welcome offer. This makes me a bit more selective, as I only pick valuable cards to justify two years' worth of annual fees. Potential cardmembers should take a hard look at the benefits of each card because often, a card’s perks can help offset the annual fee.

Related: Choosing the best American Express card for you

Be kind to your credit score

(Photo by Song_about_summer/Shutterstock)

The above points are to say nothing of the potential impact to your credit score from closing cards earlier than necessary.

While a few months aren’t likely to make a huge difference in the grand scheme of things, 15% of your credit score is based on your length of credit history or the age of accounts. The longer you keep cards open, the more they’ll boost your credit score. This means that you should always wait until the last possible moment to close a credit card and make sure you’ve exhausted all other options first.

Bottom line

While there’s nothing wrong with opening a credit card primarily for the short-term benefit of the welcome bonus, you should never, under any circumstances, close that card before your first account anniversary. Even then, understand that if you make a habit out of closing cards after exactly 12 months, you might find yourself ineligible for future bonuses or getting your applications denied.

Featured image by Shutterstock
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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TPG featured card

Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

1 - 10X points
10xEarn 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards®.
5xEarn 5x total points on flights through Chase Ultimate Rewards®.
3xEarn 3x points on other travel and dining.
1xEarn 1 point per $1 spent on all other purchases

Intro offer

80,000 bonus points
Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

Annual Fee

$550

Recommended Credit

740-850
Excellent
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more
Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10xEarn 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards®.
5xEarn 5x total points on flights through Chase Ultimate Rewards®.
3xEarn 3x points on other travel and dining.
1xEarn 1 point per $1 spent on all other purchases
  • Intro Offer
    Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

    80,000 bonus points
  • Annual Fee

    $550
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more