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Million Mile Secrets reader Phil commented:
Should I cancel a card to “free up” credit with a given bank to increase my chances of getting a new card? Or should I hold onto the card to keep my relationship with the bank strong?
1. I have had the US Bank Lifemiles Visa for almost a year now. I don’t use it much, but they recently increased my limit from $6,000 to $8,000. Now I am considering applying for the US Bank Club Carlson Visa this month. I have 16 credit cards, and a relatively short credit history (I only had 1 credit card until 2 years ago, and got that first 1 in 2009), and an income that is not particularly impressive.
Do I cancel the Lifemiles Visa before applying for the Club Carlson Visa, or should I keep it?
And if I cancel it, should I wait a few weeks until after I pay the $75 and get 6,000 renewal points?
I would like to apply for 1 of the AMEX Hilton cards soon. Should I cancel 1 of my other AMEX cards first?
Excellent question, Phil! You have some decisions to make.
Let’s look at each bank separately to find Phil’s best strategy.
Before You Decide to Cancel a Card…
Do NOT cancel a card before reading my post about losing your miles and points when you close an account!
You will NOT lose airline miles or hotel points already in your account when you cancel a card.
But you usually WILL lose points issued by banks, like American Express Membership Rewards, Chase Ultimate Rewards, or Citi ThankYou points. You’ll have to transfer these points to travel partners or to another card before you cancel to avoid losing them.
1. US Bank
Phil has the US Bank Avianca Lifemiles card. It currently offers 20,000 Avianca miles (which can be used for award tickets on Star Alliance airlines) after you make your 1st purchase.
The annual fee of $75 is waived for the 1st year. And on your card anniversary (and payment of the annual fee) you’ll get 6,000 bonus Avianca miles.
This is not normally a card I’d recommend keeping beyond the 1st year, unless you specifically collect Avianca miles. You will NOT lose Avianca miles already in your frequent flyer account when you cancel the card.
That said, Phil now wants to sign-up for the US Bank Club Carlson Premier Rewards card. So he may want to consider holding onto his US Bank Avianca card for the time being. Here’s why:
1. Keeping the Avianca card for another year shows he’s interested in maintaining a long-term relationship with US Bank, and isn’t just applying for cards to get the sign-up bonus.
2. Canceling a card (and losing a credit line) can have a slight negative impact on Phil’s credit score, because his total amount of available credit and average length of credit history will be reduced.
3. If US Bank does not immediately approve him for the Club Carlson card, he’ll have some negotiating power if he calls the reconsideration line to get approved.
For example, he could offer to move some of his available credit from the Avianca card to a new Club Carlson account. This could be very useful if his credit line is already close to the maximum limit US Bank is willing to extend him (based on income and other factors).
Phil should also remember that US Bank is picky about approving folks for cards if they’ve had a lot of recent credit inquiries. One way to improve your chances of being approved is to freeze your ARS and IDA credit reports. I was recently approved for a 3rd Club Carlson card after doing this!
So Phil, there’s no guarantee, but I think you’ll have more luck if you keep the Avianca card for another year.
2. American Express
Phil already has 4 American Express personal cards:
- American Express Blue Sky
- American Express Delta SkyMiles (no-annual-fee version)
- Premier Rewards Gold Card from American Express
- American Express Starwood Preferred Guest
Usually, American Express limits folks to having 4 personal or business credit cards at 1 time. But charge cards (cards where you pay your balance in full each month) do NOT count towards that limit.
Phil has 3 American Express credit cards and 1 charge card (Premier Rewards Gold Card from American Express). So in theory, he could get another American Express credit card before he hits the 4 card limit.
That said, there’s no guarantee he’ll be approved for the an American Express Hilton card. That depends on the amount of credit American Express is willing to extend him, his credit score, and other factors.
He could consider applying for a Hilton AMEX card. If he’s not instantly approved, he could offer to cancel or move credit lines from 1 of his other cards. For example, he could close his American Express Blue Sky or Delta SkyMiles card (neither of which offer great perks for Big Travel).
If Phil’s oldest card is an American Express card, he should NOT cancel it. That’s because it will likely have a negative impact on his already short length of credit history.
Note: Sometimes banks will offer to downgrade your card to a no-annual fee card when you try to cancel. Do NOT downgrade to a card that offers a sign-up bonus. Because you will NOT generally get the bonus. And you may NOT be able to receive the bonus in the future!
Cancelling credit card accounts to improve your chances of being approved for new cards can be a tricky decision!
Depending on your income, credit score, history, and other factors, banks may limit the amount of total credit they’ll offer to you. So you may have no choice but to cancel or move around credit lines.
That said, banks also do NOT like it when folks repeatedly sign-up for cards, receive the bonus, and cancel right away.
And some lenders, like American Express, limit the total number of cards a person is able to have at 1 time.
Thanks for the question, Phil, and good luck!