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We’ve written about when and why you might cancel or downgrade a credit card. Sometimes, the perks of a card don’t justify its annual fee. Canceling a card is easy, just call the number on the back of your card. You’ll speak with a customer service representative at the bank who can assist with closing your account. Sometimes, you can also cancel a card by chatting online with a representative or sending a secure message.
But before you cancel, consider your credit score. There can be alternatives to canceling a card if the only reason you want to cancel is the card’s annual fee isn’t worth it. Canceling a card can have an impact on your credit score, so before you make that call let’s look at all your options before you cancel a credit card.
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How to know when to cancel a credit card
It’s never a good idea to cancel a card as soon you earn the into bonus because this can hurt your relationship with the bank. Instead, you should trying a card for ~11 months to see if the perks make it worth keeping. And if the card has no annual fee, you can keep it forever.
Also, I wouldn’t cancel a card you’ve had for a long time. Because getting rid of an old card will impact your length of your credit history and credit utilization, which are factors in calculating your credit score. That said, if you have lots of cards, getting rid of one or two will likely have a minimal impact to your score. And keep in mind, if you cancel a credit card, it remains on your credit report for up to 10 years. There’s no way to erase the account information and payment history from your report.
If you’re ready to cancel a card, keep these three tips in mind.
Be sure you won’t lose your miles or points
The potential to lose miles or points when canceling a card depends on the type of card you have. You will not lose airline miles or hotel points already in your airline or hotel account after canceling a card. But be careful with flexible bank travel credit cards earning Amex Membership Rewards, Chase Ultimate Rewards, and Citi ThankYou points because it’s possible to lose these points when you cancel a credit card.
Ask the bank for a retention offer
Banks don’t want to lose you as a customer. Even if you’re just canceling one of many cards issued by the bank, they might incentivize you to keep your card open.
When you call the number on the back of your credit card to cancel be sure that you speak with a customer service representative. After mentioning you’re looking to cancel the card, the representative might offer points or a statement credit to keep your account open. If nothing is mentioned just ask if there are any retention offers available on your account. Recently, I was given a retention offer for my CitiBusiness® / AAdvantage® Platinum Select® World Mastercard®. I kept the card because I was offered a statement credit of $99 (the cost of the annual fee) after spending $99 in the next 90 days.
Run the numbers when you receive an offer to determine if it’s a good deal. If there’s no retention offer and you decide to cancel the card, ask the representative to transfer the credit line from one card to another to prevent your credit utilization from increasing. This isn’t possible with all banks, but it’s worth asking.
Downgrade to a no annual fee card
Instead of canceling a credit card with an annual fee, I typically recommend switching to a credit card with no annual fee, if possible.
This way, you can avoid having any impact to your credit score by:
- Keeping your credit line
- Maintaining your average length of credit history
And although you’ll technically have a new card, the account information stays the same. So the card you downgrade to will not show up as a new account on your credit report. This is great news if you’re concerned about Chase’s tougher application rules. But keep in mind, you won’t be eligible to earn a sign-up bonus on the new card when you downgrade.
To cancel a credit card, just call the phone number on the back of your card. Speak with a customer service representative and tell them you’d like to close the account. But, before you close a card, consider the potential impact to your credit score. Canceling old accounts or cards with large credit lines can result in a credit score decrease.
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Featured photo by @beachbumledford/Twenty20.