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.