American Express Cash Back Chase Credit Cards

Credit Card Cancellation for Beginners

Word of warning: If you’re not paying off your credit card balances in full every month, ignore this – pay them off and cancel those cards immediately until you get to a place where you can. Being stuck in debt is not acceptable collateral damage in the miles and points game

Feel free to move along if you’re a pro at this game, though it’s possible you’ll learn something new. This post is geared more towards the casual or newer points enthusiasts out there. I deemed it necessary because the other day a friend told me they had “transferred all of their Ultimate Rewards points to United and cancelled their Chase Sapphire Preferred card.” While not a bad move, I just want to make sure people know the options they have when canceling a card. Although I may be risking the wrath of George writing a post like this, the fact is there are beginners out there so if you fall into that category this post is for you!

Background Info you should already know alert!

Two large parts of your credit score is your average age of accounts and your credit utilization. Average age of accounts is a function of how long your cards have been opened, credit utilization is the ratio of credit used (money you put on your cards) vs. credit extended to you (your credit limits). So if you cancel a card, you are at lowering your credit utilization and eventually you might hurt your average age of accounts as well (though closed accounts still contribute until they drop off in 10 years). More details here if you’re interested.

Trying to get the bank to waive the annual fee

When you are thinking about canceling a card, I generally call a month or two before the annual fee is going to hit. I simply tell the agent the truth – I’m thinking of canceling my card because I feel like the annual fee outweighs the benefits I get from the card.

This likely will get you sent over to a retention specialist who often will offer you something to keep the card. This could be a straight up fee waiver, or a waived fee after a certain amount of spending or purchases, etc. etc. Sometimes you even get bonus points – if you google “retention offer ______ flyertalk” you’ll usually see what’s out there.

"Premium" cards come with an annual fee that may or may not be worth it
“Premium” cards come with an annual fee that may or may not be worth it

No retention offer? Another thing to consider before canceling

Remember a lot of the premium credit cards that have annual fees have no-fee versions. Consider downgrading to one of these versions before outright canceling. This will increase your average age of accounts AND preserve your credit line (and thus help your credit score in the long run).

Still going to cancel? Don’t lose your points

If you have an airline co-branded credit card, your miles are safe if you transfer. If you have a cash back card, I’d cash out before canceling. If you have a transferable points card like the Chase Sapphire Preferred – my suggestion is to just transfer all your points to another Ultimate Rewards points card – even something like the Chase Freedom. This keeps your points flexible – when you get another “premium” Ultimate Rewards card you’ll be able to transfer them to travel partners again.

Why not just transfer points to a partner before canceling?

This is something you can do and is what my friend did. In his case it’s not too bad because he has a redemption in mind. But my general rule of thumb is flexibility is key. Even though Matt wrote that he hasn’t been able to use that flexibility for Membership Rewards (semi-opposing view here) – I find flexibility is one of those things you miss when you don’t have it.

Take my friend for example. He transferred his points to United because he wants to use them to go to Asia next year, that’s a great plan. But what if he needs a short haul flight to JFK for an emergency or he feels like taking a spontaneous trip to Charlotte (OK he’s not that type of guy but let’s just pretend for sake of argument). Well, his points are stuck in United so he won’t be able to transfer them to Avios (which would be the cheapest thing).

Transferable points give you flexibility that you shouldn't give up willy nilly
Transferable points give you flexibility that you shouldn’t give up willy nilly

But, he says, I don’t have a premium Ultimate Rewards card anymore! Sure – but IF you need it you can get that in like two weeks. If you just downgraded the Sapphire you could even just reupgrade it and it’d take even less time. Plus, he’s married so his wife could get one too and he could just transfer to her. Anyway – I’m all about options. In a worst, worst case scenario – he doesn’t find his tickets to Asia and now his UR points are stuck in United. He has the Chase Freedom so he could have at least used them for cash.

Final Thoughts

Hopefully this highlights some of the things you should be thinking about when canceling a card. I recognize that people play this game at different levels – so different folks are going to come to different conclusions about what’s best for them. Just make sure you’ve thought out your strategy before you do something rash and you should be coming out ahead time after time.

 

 

Joe
Just an average joe trying to fly his family for less

3 thoughts on “Credit Card Cancellation for Beginners”

  1. @asthejoeflies
    -if the goal is to churn.. whats the best method vis-a-vis credit history, in your opinion?
    -downgrade to no-fee version? then reapply later.. possibly needing to close the no-fee account in order to open the new churn account if the bank deems you having too many accounts with them?
    ex: CSP annual fee due. convert to sapphire non-preferred. wait 24 months (per chase?). churn success.
    thanks!

    1. I don’t think you can get the bonus if you still have any version open, though I’m not sure about that. I think with Chase you definitely want to keep your credit line – either by transferring or downgrading – if you can downgrade to freedom that’s ideal. Chase seems to be cracking down on ppl just signing up for the bonus (or so they say), so I think that bears monitoring. Sorry I don’t have any better answers but maybe someone else can comment too?

Leave a Reply

Your email address will not be published. Required fields are marked *