SHOULD YOU CANCEL YOUR CARD AFTER THE FIRST YEAR?
Almost every day I get a message on Instagram asking if you should cancel your credit card after getting your welcome bonus points. The answer is no, no and no. You should absolutely keep your credit card for at least the first year.
Credit card companies are cracking down on people they believe are gaming the system, that is, people that apply for a card, earn the sign-up bonus and then cancel the card quickly. This can raise red flags to the credit card company, and you run the risk of having your points taken away. This is something you do no want to happen.
Let’s talk about the options you have when your credit card anniversary arrives.
Just by keeping the World of Hyatt Credit Card every year and paying the $95 annual fee, I get a free night certificate that I use for hotel that costs over $400 a night
KEEP THE CARD
Believe it or not, there are more cards than not that I decide to keep every year. Here’s how I decide:
Benefits vs Annual Fee: Does the card's benefits outweigh the annual fee? If the benefits of a card, like a free checked bag or a free hotel night, lounge access, give me more benefit than the annual fee, I will keep the card.
Here’s an example: I have carried the World of Hyatt credit card for over eight years. The annual fee is $95, and it comes with a Category 4 free night award every year that I pay the annual fee. My husband and I both have this card (remember Two Player Mode) which gives us two free nights a year. We have used these awards to book rooms that cost well over $400 a night. That makes paying the $95 annual fee completely worth it. We have eight hotel cards between us that we keep every year. That give us over two weeks of reduced priced hotel nights every year.
Another card we keep year after year is the Chase Sapphire Preferred® Card. I have had this card in my wallet since I started traveling on points in 2015. The annual fee is $95 and the benefits I get with the card like trip delay/cancellation insurance, primary car rental collision/damage insurance are worth it.
Before you close your card, do an assessment of the perks and benefits you get by paying the annual fee and holding the card.
DOWNGRADE YOUR CARD
An alternative to canceling your card is to downgrade your card to a no annual fee card with the same bank. This is beneficial because it maintains your credit history and your relationship with the bank. Keep in mind that when you downgrade your card, you are no longer eligible to receive the sign-up bonus for that card, so choose smartly.
Not every card will have a downgrade option. With Capital One you can see if you are eligible for a product change by logging in to your account.
ASK FOR A RETENTION OFFER
If you are really on the fence about keeping your card, another alternative to canceling or downgrading is to ask for a Retention Offer. This is something that the bank will offer you to incentivize you to keep that card another year. Offers may include:
Waiving the annual fee
Awarding bonus points (sometimes this includes courtesy points or points with a required spend in order to get them)
Wait until the annual fee on your card has posted or is due (unless it is a Capital One card - there are many data points to lead to them not reimbursing the annual fee on their cards after it has posted). Keep in mind that not all banks will offer a retention bonus.
In order to ask for a retention bonus, you have to send a secure message from your account or call the bank. You will let them know that you are considering closing the card and ask them specifically if there are any retention offers for the card. They will either say yes or no. If they deny your request, consider downgrading to a no-annual fee card. Even if you plan to keep your card, it never hurts to call in and ask for a retention offer.
CANCEL YOUR CARD
The last option is to cancel your card. Here are some things to consider before making that choice:
Never close a credit card during the first year. You’ve already paid the annual fee for the first year so there’s really no reason to do so. You don’t want to ruin your relationship with the bank. Also, most banks give you a 30-day grace period, so it’s best to wait for the annual fee to post, then call in to cancel and ask to have the annual fee waived
Never close the credit card you have held the longest. This is connected to your credit score. A long credit history equals a higher credit score. When you cancel that old card, your credit score will drop. Also, keep in mind that your credit utilization will change when you cancel your card which has the potential to negatively affect your credit score.
If you have a transferable points card like the Chase Sapphire, your points are tied to your credit card account, and you will lose your points if you cancel. So, make sure you transfer or use points before canceling. If you have an airline or hotel credit card, those points are in your loyalty account, so you will not lose them if you cancel.
FINAL THOUGHTS
Remember, traveling with points is a marathon not a sprint. If you want to travel with points long term, it’s imperative to maintain a good relationship with the banks. Start slow, pay off your balance every month, keep the card for at least one year. Apply, earn, book. Rinse and repeat.
Happy Travels!
Have more questions? Check out this post on the most FAQ here.
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Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
