Keep, Downgrade, or Cancel Your Credit Card?
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EDITORIAL DISCLOSURE:
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.
Navigating the points and miles game can feel like trying to assemble IKEA furniture without the instructions. By now, you understand the concept of opening cards and earning points, but one of the more common follow-up questions is some form of:
“Okay, do I keep all these cards forever?”
“What do I do with it after I get the welcome bonus?”
”Do I just close the card now?”
First— Wait 365 Days.
It is essential that you KEEP YOUR CARD FOR ONE FULL YEAR and wait to make the decision to keep, downgrade, or cancel after the year is up and the annual fee posts.
‼️ You do not want to get flagged for “churning cards” by canceling or downgrading after receiving the welcome bonus. This activity can cause suspicion, and for the long-term health of your points and miles strategy, you want to honor the banks’ rules and keep that relationship thriving!
Don’t worry— if you ultimately decide to cancel, you’ll typically have a 30-day window after the annual fee posts to decide and be refunded the annual fee.
NOTE: If you’re debating canceling an older card, just be sure it’s not your oldest card. Keeping your oldest card open helps boost your credit score thanks to the long credit history!
Has it already been a full year since you’ve opened your card? And it’s not your oldest card?
Then let’s evaluate your options! 📝
Option 1: To Keep or Not to Keep?
🔍 Assess the Annual Fee
Before you consider breaking up with your card, take a moment to evaluate its benefits. Does the card offer perks like airport lounge access, travel credits, or bonus points on dining and travel? If these benefits outweigh the annual fee, it might be worth keeping the card in your wallet. After all, some cards are designed to provide ongoing value year after year.
💳 Real-Life Example: Our Capital One Venture X Rewards Credit Card has a higher annual fee compared to most of our cards-- but the benefits include airport lounge access and an annual $300 travel credit. For us, each year we continue to find that the value the card brings is worth paying the annual fee.
Since we frequent the airport, having lounge access through our credit card benefit is one we make A LOT of use of — making this card (and the man in this photo) a KEEPER! 😜
💰 Could You Be Swayed with a Retention Offer?
Here’s the thing: banks don’t want to lose you. Sometimes they’ll offer incentives (known as retention offer or retention bonus) to keep you as a customer. These could be in the form of bonus points, a statement credit, or even a reduced annual fee.
Tips for Weighing a Retention Offer vs. Canceling
Compare the Value of the Offer to the Annual Fee: If the retention offer includes bonus points or a statement credit that effectively cancels out the annual fee, keeping the card might make sense. For example, if your annual fee is $95 and they offer you 10,000 points (worth about $150), that’s a net win.
Sometimes banks will even waive the annual fee altogether as a retention offer, or give you an opportunity at a large stash of points for spending X amount of dollars in X months. Before you call, think through which offers you would say “yes” to and which you’d probably pass on.
Consider How Often You Use the Card’s Perks: If you’re barely using the card’s benefits (like travel credits or lounge access), even a decent retention offer might not be worth it. On the other hand, if you frequently use those perks, a retention offer could tip the scales toward keeping it.
Think Long-Term: Canceling a card shortens your credit history and lowers your available credit, which can ding your credit score. If you’re planning to apply for a mortgage or car loan soon, keeping the card might be the smarter move.
Sample Script for a Retention Call
Here’s a simple script to help you navigate the call with confidence:
You: Hi, I’m considering canceling my [Card Name] because the annual fee is coming up, and I’m not sure if I’m getting enough value from it. Before I make a final decision, I wanted to see if there are any retention offers available.
Bank Rep: Sure, let me check if there are any offers on your account. (They might put you on hold for a moment.)
You (if they offer something): Thanks for that offer! Can you clarify if there are any spending requirements to receive the bonus points or statement credit? (This helps ensure you understand any conditions attached.)
You (if they don’t offer anything): I appreciate you checking. Since there’s no offer available, I may have to reconsider keeping the card given the annual fee. Could you confirm that I can cancel the card without losing any remaining points or what your policies are regarding annual fee reimbursement?
☎️ Pro Tips for the Call:
Use the word CONSIDERING: It’s a good practice to mention you’re simply “considering” canceling the card. This puts you in a good position to end the call without feeling the need to make a final decision while on the phone.
Be Polite: This should go without saying, but you’re more likely to get a good offer if you stay friendly.
Take Notes: Write down the details of any offer, including whether there are spending requirements or dates you need to be aware of.
Be Prepared to Walk Away: If the offer doesn’t make sense for you, it’s okay to proceed with canceling or downgrading. You may also not want to cancel on the spot just yet, so you can thank the representative for their time and say you’ll think over it further before making a final decision.
By calling the retention line first, you might score a deal that makes keeping the card worthwhile. If not, you can proceed with canceling, knowing you explored every option. Remember, in the world of points and miles, it’s all about maximizing value—and sometimes, a simple phone call can do just that!
Option 2: Downgrade It, Baby!
If you're not getting enough value to justify the annual fee, downgrading could be a smart move. Downgrading means switching to a no-annual-fee or lower-fee card within the same card family. This way, you maintain your credit history, keep your points and your credit line remains open, but without the hefty fee. It's like moving from a luxury apartment to a cozy studio—you still have a place to live, but at a fraction of the cost.
However... not ALL cards have the option for a downgrade, so do your research!
☝️ One Last Thing to Consider: When it comes to downgrading, you’re often counting yourself out for the welcome bonus on that card. Depending on the card you’re downgrading to, if the welcome bonus is worthwhile, you mayyy want to consider canceling your current card after all, to give you the opportunity to come back and get the welcome bonus on the downgraded version.
Points and miles have taken us all over the world— including Doha, Qatar!— so we’re always looking for the best ways to maximize the number of points we can earn.
Option 3: Go Nuclear (Cancel It)
Canceling is usually our last resort. Closing a credit card can impact your credit score by reducing your available credit and shortening your credit history. Keep in mind, it’s typically not a drastic dip and your score will often bounce back within 30-90 days of good credit card habits (paying in full and on time, keeping your credit utilization low, etc.)
If you haven't used your points, you might lose them upon cancellation. Many co-branded cards for airlines and hotels are an exception, as your points are usually attached to your loyalty number, not the card itself. Either way— do your research before canceling! 🧐
Timing Is Everything: Again, wait at least a year before making any changes to your card to avoid potential penalties or forfeiting rewards.
Mind Your Credit Score: Multiple card applications in a short period can ding your credit score. Space out your applications at least 90 days and always pay your bills on time.
Stay Up-to-Date: Keep an eye on the ever-changing landscape of points and miles. With inflation and program changes, the value of your points can devalue over time. Redeem them sooner rather than later to avoid "pointsflation." Earn and burn, babyyyy! 🔥
💳 Bottom Line
The world of points and miles is like a choose-your-own-adventure book. Knowing whether to keep, downgrade, or cancel your card is going to be personalized based on your budget, travel needs, and what cards are already in your wallet.
With a bit of knowledge and strategy, you'll be able to make the best educated step that’s right for you, all while keeping your credit in tip-top shape.
Be sure to follow us on Instagram to learn more beginner-friendly points and miles tips and follow along on our personal points and miles journey!
Or if you’re ready to open your next credit card… click here to check out all our favorite cards!
Editorial Disclosure: 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.