Before cancelling a credit card, especially a rewards earning card, there are a few steps you should take…
1. Stop using the card well before cancelling
If you have used your rewards card for any purchases since the last statement close date, then you are due additional rewards for that spend. If you cancel the card now, you won’t get those rewards. Consider waiting until you’ve earned the expected rewards before cancelling.
2. Check for other pending rewards
Many credit cards offer annual bonuses. Several hotel credit cards offer free night vouchers. Some hotel and airline cards offer annual bonus points. Some cards offer certificates for free lounge access or other perks. In most cases, it is possible to get those benefits around the time that your annual fee comes due, but still cancel and get the annual fee reimbursed (if it was already paid). If you’re expecting benefits like these, wait until you’ve received the benefit before cancelling your card.
3. Keep or cash out rewards
With hotel and airline credit cards, you do not have to fear losing your rewards when you cancel your credit card: your existing points are tied to your hotel or airline loyalty account not to your credit card account. Many credit cards, though, offer bank-specific rewards that you will lose if you cancel your account. With cash back cards, simply make sure to redeem all expected cash back before cancelling. If your rewards are in the form of points that can be redeemed for gifts or travel, though, you might not want to cash in those points since you can usually get better value for travel.
With most such programs, you can downgrade to a no annual fee version of the card in order to keep your points alive. Each program, though, has different specifics. Here is what I recommend with a few popular points programs:
- Chase Ultimate Rewards: Transfer points to another Ultimate Rewards account (either your own or your spouse / significant other’s) or downgrade to no fee card.
- Amex Membership Rewards: Open a no-fee EveryDay card to preserve your points.
- Citi ThankYou Rewards: Downgrade to no fee ThankYou Preferred card.
4. Change automated payments
If you have any bills setup to autopay from this credit card account, don’t forget to change those payments to a different card.
5. Ask about retention offers
Call to say that you’re thinking of cancelling but want to know if there are any retention offers available to you. Make sure they list all available offers. Sometimes they’ll offer one and won’t tell you about another until you have declined the first one. If the retention offer is good enough, keep the card open.
6. Move credit line to other cards
If you decide to cancel the card completely, and if you have other cards with the same bank, ask to move the credit line to another card. Different banks have different rules about how much can be moved.
After cancelling or downgrading…
7. Update your credit card tracking spreadsheet
If you sign up for lots of credit cards, its important to keep track of which cards you’ve signed up for, when you signed up, and when you cancelled (or downgraded).
8. File or dispose of old card
Don’t forget about authorized user cards too.
Please note that Massachusetts has a law that requires all credit card companies to refund the prorated unused fee when you cancel a card. If you are not in Massachusetts and wish to “manufacture” this option, you need a friend or someone where you can change your mailing address to MA–a PO Box will do. (personally attest), and THEN cancel the card as a Massachusetts “resident” and Amex (or anyone) will pro-rate the fee.
hey Greg – a quick question:
I typically cancel the card after about 11 months after getting it. Typically I am not using it after the first 3-4 months when I have gotten the bonus points. From a 24 month minimum requirement – this elongates the time period that I have to wait to apply for the card. The reason I have done this is because I have some perception that CC companies think I am canceling the card because of the fees at 11 months vs. 3-4 months when I have received the points. What’s your recommendation?
With Amex, the new recommendation is to always wait a full year. Amex may claw back a welcome bonus if you cancel too soon. So, given that’s happening with Amex, I think it’s a good idea in general, across the board. Plus, if you wait until the annual fee posts to call to cancel, you might have a better shot of getting an attractive retention bonus.
Thanks Greg!
[…] There’s a reason that credit card companies are willing to give away points & miles. They make a lot of money from interest and fees. Interest and fee payments can quickly wipe out the benefits gained from signup bonuses. The only way to come out ahead is to pay your credit card bills in full, every month. If you can’t do that, then I highly recommend against signing up for new credit cards. Further, every year when annual fees come due you should evaluate whether the card is worth the fee. If not, cancel it or call to downgrade it to a fee free card. To avoid losing points, see our checklist for cancelling credit cards. […]
[…] Thankfully, it is very easy to keep Chase Ultimate Rewards points alive: simply keep the points in an open Ultimate Rewards account and they will not expire. Note that if you close an Ultimate Rewards card, you will lose any points associated with that card. You should first combine points to move points away from the card you intend to close and to another card that will remain open as per the sharing section above before canceling. See: My 90,000 point Ultimate Rewards mistake. See also: A checklist for cancelling credit cards. […]
[…] In case you end up actually cancelling your card, be prepared. Please review our checklist for cancelling credit cards. […]
[…] Thankfully, it is very easy to keep Chase Ultimate Rewards points alive: simply keep the points in an open Ultimate Rewards account and they will not expire. Note that if you close an Ultimate Rewards card, you will lose any points associated with that card. You should first combine points to move points away from the card you intend to close and to another card that will remain open as per the sharing section above before canceling. See: My 90,000 point Ultimate Rewards mistake. See also: A checklist for cancelling credit cards. […]
[…] In case you end up actually cancelling your card, be prepared. Please review our checklist for cancelling credit cards. […]
Could you enlighten me on your overall approach or perhaps point me to the right post on your site that explains what I’m about to ask…? Seems that a big part of your strategy is to open lots of different cards with bonus point offers for spending a certain amount in the first few months. Most of these cards have annual fees, so I assume you close them out after the first year which is usually free. Is that the case? I’m also curious how the constant churning of new cards has impacted your credit score. What approach do you take to minimize any negative impacts to your credit?
Yes, after a year I usually cancel or downgrade to a no-fee card unless the bank gives me a retention offer that is worth more than the annual fee. My credit score initially improved when I started applying for cards, but it has bounced up and down since while always staying above 750. All of this is explained in my free email newsletter: http://eepurl.com/j_M9n
Hi,
I just cancelled my BofA Virgin Atlantic card which had a $90 annual fee. The CSR offered me a 5,000 point retention offer. But I figured that (if I did the math right) that would be 1.9% fee on those bonus miles. I know that’s not a whole lot but I figured that I could get those 5K miles elsewhere for hopefully less.
What are your thoughts about that?
1.8%. But, yes, I agree. 5,000 points isn’t worth the annual fee.
Also pull any on-line statements from the account in the event there are tax related items you need for filing income taxes before the account is closed. You do not know how much longer you may access to that information.
You also want to move the credit line from the closing card to your other cards issued by the same bank. I forgot to do so with one Amex that I’ve been holding for a long time, and consequently my credit score sank twenty something points immediately.
Good idea. Added.
Great Checklist! Do you have a format for your credit card tracking spreadsheet on the site. This is something that would be very useful but I’m not sure how to set this up on my own. .
Mine is a bit of a mess, but I’ll see if I can put one together to share.
Have you been able to do this?
I really think it’s a resource that isn’t out there and is greatly sought after!
Yes I did a while ago, but I’ve since switched to recommending Travel Freely for keeping track of your cards: https://frequentmiler.com/take-the-stress-out-of-credit-card-bonus-hunting-travel-freely/
If you’d prefer a spreadsheet: https://docs.google.com/spreadsheets/d/1QzKW-9eaaEj7OFZs5VRPszDiwdBVWPeO4cIUTchFkzw/edit?usp=sharing
Sorry this happened, and thanks for the checklist.
A suggested addition:
Check flyertalk for retention offers, then ask for one before canceling.
Good suggestion! Updated.
[…] A checklist for cancelling credit cards […]