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

Feb 20, 2020

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Reader Questions are answered twice a week by TPG Senior Points & Miles Contributor Ethan Steinberg.

One of the biggest mistakes I see people making when they start 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, and it’s possible that after 12 months of using the card and experiencing its benefits, you might change your mind about it before the annual fee comes due. TPG reader Alex wants to know if it’s OK for him to cancel a credit card before his first account anniversary …

I recently opened the Delta SkyMiles® Platinum American Express Card and earned the welcome bonus. I know I’m never going to use this card again (I put all my spending on The Platinum Card® from American Express). Can I cancel the card now, or will there be any penalty? Will I lose my bonus miles?

TPG READER ALEX

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This is one of the most common questions we receive, but 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 a whole host of reasons why this is a bad idea, but let’s start with some of the consequences Alex might expect from Amex if he were to do this.

Buried in the terms and conditions of the Delta SkyMiles® Platinum American Express Card (and nearly every Amex card out there) is the following important line (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 welcome bonus clawbacks for people trying to skirt the rules in various ways.

Now some people might be thinking they’re safe from this because they’ve already spent their welcome bonus, but in the past we’ve seen Amex take people’s Membership Rewards balances into the negative when clawing back bonuses that had already been spent, and the terms are clear that Alex might face other disciplinary action, including the closure of his other Amex accounts. Simply put, this is not worth the risk.

When I’m analyzing my Amex credit 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 bonus eligibility” checker that may pop up during your application and alert you that you’re ineligible to receive a bonus, 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 taking moves to discourage people who are opening credit cards just for the bonuses and not growing into valuable long-term customers. While we don’t know exactly what this Amex’s bonus 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 bonus. This makes me a bit more selective, as I only pick cards that are valuable enough to justify two years worth of annual fees. Alex should look at the benefits of his  Delta SkyMiles Platinum Amex card (like the annual Delta companion ticket) because often a card’s perks can more than offset the annual fee.

Related: Choosing the best American Express card for you

All of this is 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 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.

Thanks for the question, Alex, and if you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

Featured photo by Isabelle Raphael/The Points Guy.

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