Ultimate Guide to Closing a Credit Card

Once you get started with points and miles, you’ll start to accumulate a lot of credit cards. Managing all those cards can get complicated, but you don’t have to keep them all forever! While you will want to keep some of your cards open, there will also be times when you want to close a credit card.

For long-term success in this hobby, it’s important to know when and how to close a credit card in a way that keeps your credit score strong and keeps your relationship with the bank healthy.

Want a cheatsheet? Get the free download of the our list of questions here.

Why You Might Want to Close a Credit Card

Here are some things to think about when deciding whether or not to close a credit card.

The annual fee no longer outweighs the benefits

It can make sense to keep a card with a high annual fee if you’re getting a lot of value from the benefits. However, if you’re not using the benefits, then it might be time to consider closing the card.

To get the welcome offer again

You typically can’t get a welcome offer on a card you currently have open. In some cases, it makes sense to close the card so that you can apply for it again to earn a new welcome bonus.

Keep in mind there’s often a waiting period before you’re eligible to earn a bonus on the same card again. This could be 24 months, 48 months, etc. It varies widely depending on the card.

You have a lot of cards open

If you’ve been at this hobby a while, you probably have a lot of cards open. You may be using all of those cards, or you may not. If you find you’re not using certain cards anymore, it may make more sense to close some of them.

There are plenty of reasons to keep cards open, but that doesn’t mean you need to keep every single card open long term. Closing some of the cards you don’t use anymore can make things simpler and easier to manage.

Questions to Ask Before Closing a Card

These questions can help you decide whether or not to close a credit card. Want a cheatsheet? Get the free download of the our list of questions here. 

Is there an option to downgrade or product change this card?

If you don’t want to keep a particular card open, you may have the option to change it to a different card with the same bank. This is called a “product change”.

“Downgrading” refers to changing from a credit card with a higher annual fee to one with no annual fee or a lower annual fee. You can also “upgrade” a card to a version with a higher annual fee.

When you product change a card, it typically has the least impact to your credit score. Because even though the card “product” or precise credit card in your wallet will change — a bank generally keeps the same account number. That means if you open a card in 2020 and then product changed it in 2024 — it’s going to appear as one continuous card since 2020 on your credit report.

If you want to keep the credit line open but you don’t want to pay the annual fee, it may be worth “downgrading” to a less expensive card.

Will I lose my points?

This depends on the type of card you have.

If your card is an airline or hotel card, those points are already transferred to the airline or hotel loyalty program. They’re not held with the bank. That means that even if you cancel the card, those points are safely kept with the loyalty program. 

If your card is a card that earns bank points that have various transfer partners — like Ultimate Rewards, Citi Thank You Points, or American Express Membership Rewards, you CAN lose your points if you just straight out cancel your card.

You’ll want to do some research before you close a card with transferrable points to make sure you’re not going to lose them. Depending on the card, some options might be transferring your points to another card you hold with that bank, transferring them to a family member who holds a card with that bank, or transferring the points to a hotel or airline program.

Will I lose the ability to transfer my points to travel partners if I close my card?

A lot of banks have a similar structure to their card offerings.

They often have cards that earn cash back for no annual fee and cards that earn bank-specific points that have annual fees of $95 or more.

Chase, for instance, has the Chase Freedom Flex® and Chase Sapphire Preferred® Card. The Freedom cards earn cash back. The Sapphire card earns Ultimate Rewards® points. If you only have the Freedom card, you’ll only be able to get cash back. But! If you have both cards, you can combine your cash back with your Ultimate Rewards points. And then you have all the options to redeem the points for cash back or transfer to travel partners.

If you cancel your Sapphire card — or you downgrade it to another Freedom card — you lose the ability to transfer any points to airline and hotel loyalty programs.

To be able to transfer your points to travel partners, you’ll need to keep at least one card open that has the ability to transfer points from that bank.

Are there any benefits to use before I close a credit card?

If you have a card that gives you monthly benefits like dining credits or airline fee reimbursements, look at using those before you close the card.

Many cards offer anniversary points or anniversary free nights.  You can often get those one more time before you close a card, even if the card is only open for a year.

This works because after your annual fee posts, you usually have 30 days to call and close a card and get a full refund of that annual fee. But many of those anniversary points or free night certificates will get dropped in your account within days of the annual fee posting. So there’s usually a period of a few weeks when you’ve gotten your anniversary bonus but still have time to cancel your card.

And if you’re getting a free night certificate, you don’t have to stay before you close the card, you just want to wait until that free night certificate hits your account before closing. Then you can use it whenever you want, before the expiration date on that specific certificate (usually one year from when it’s issued).

This doesn’t work for all cards — American Express, for instance, usually doesn’t give the anniversary nights for the Marriott cards for about 6-8 weeks after your annual fee — so keep that in mind.

Should I keep this card so I can refer other people to it?

Other people might just be your partner or spouse.

As an example, if you and a partner are going back and forth with earning Companion Passes every few years — you’ll want to keep at least one card alive until you can refer your partner. That’s because current referrals for those cards are worth $250 to $300.

It’s worth adding in the value of known future referrals to your annual fee equations. Getting a referral bonus worth $250 makes paying an annual fee of $69 look a lot better. 

And if you’ve referred someone from your card — and your referral bonus hasn’t posted yet — that sometimes will be a reason to keep it one more year — depending on the value of the referral bonus.

How will closing this card affect my relationship with this bank?

This isn’t a black and white answer. 

But this question is one reason we often prefer to downgrade a card rather than straight out cancel it.

Banks want good customers. They want customers who stick around and use their products. If you’re continually opening cards for 12 months and then closing them immediately after 12 months, you don’t look like the best customer. 

Because of that, it can be a good general practice to see if there’s at least one card you can keep open with each major bank long term. That way, you can keep your relationship with that bank alive.

If I close a credit card, how will it affect my credit score?

This depends on several factors.

First of all, if it’s a business card, it shouldn’t affect your credit score at all to cancel it.

If it’s a personal card, it’s going to depend a lot on the strength of your credit score. Cancelling a card primarily affects: Length of credit history, payment history, and credit utilization.

Having a long credit history is good for your credit score, but cancelling a card doesn’t affect this part of your score right away. That’s because cards in good standing stay on your credit report for 10 years! If you choose to cancel a card you’ve had for a long time, just be sure you’re also keeping others that have a decent credit history — or you’re opening one you plan to keep for a while.

That way by the time your closed card falls off your report — in 10 years — you have another card you’ve had for at least 10 years with good payment history.

Cancelling a card can have an immediate affect on your credit utilization. Credit utilization refers to the total credit extended to you versus what you have used. This factor is 30% of your score.

If you have a lot of credit cards, you likely have a lot of credit extended to you. And if you’re following best practices for travel points, you likely aren’t using much of your credit because you’re not carrying a balance – you’re paying off your card in full. So this factor probably won’t affect you as much.

But if you have some credit card debt, only have 1-2 cards open, or if the cards you are keeping open have very low credit limits and you’re closing a card with a very high credit limit — you might take a bigger hit if you close the card. One way to avoid that kind of hit is to move the credit from the card you’re closing to a card you’re keeping open (more on this below).

For more on credit scores, read here or listen here.

Can I get a retention offer?

Retention offers aren’t common, but it is sometimes possible for the bank to offer you an incentive to keep your card open for another year.

To find out if you’re eligible for a retention offer, just call the number on the back of your card and say “I’m considering cancelling my card, do you have any retention offers?”

Sometimes they might offer a partial waiver of your annual fee or a bonus of a certain number of points if you do more spending. 

If the offer is good, it might be worth keeping the card open another year. If you don’t like the offer or you’re not sure, you can tell them you’re going to think about it. You can always try calling again to see if you get a different offer, sometimes the retention offers available can change.

Canceling a Credit Card

If you’ve decided that the right move is to close a credit card, just call the bank and tell them you want to cancel. But before you do that, here are some steps you might want to take first.

Use or Transfer Points

If you’ve determined that you’ll lose points by closing the card, make sure to use or transfer those points before closing. Sometimes you’ll have 30 days after closing a card to use your points, but you don’t want to forget so it’s a good idea to go ahead and use the points before closing the card.

Consider Moving Credit

If you want to keep the credit that has been extended (but not the credit card) you can ask to have the credit moved to another card you hold with the same bank.

To do this, just call the bank and ask “Can I move my credit limit from Card A to Card B?”

It’s not always possible to move credit, but often times it is. Keep in mind that credit can only be moved from personal card to personal card, or from business card to business card. You can’t move credit from a business card to a personal card or from a personal card to a business card.

Make the Final Payment

If you’re looking to reopen the same card, go ahead and pay off your bill right away (if you have a balance). Sometimes the system still considers you to have the card as long as you have an open balance. If your account is set to autopay, it might not be scheduled to pay for a few weeks. Better to just pay it off manually.

Update Your Records

Make sure to note the product change or cancellation in your records. If you use an app like Travel Freely to track your cards, you can note any changes there. That way you can stay up to date with what cards you have open and when you will be eligible to earn a bonus on that specific card again.

Ultimately, the decision to close a credit card is a personal one. Consider your long-term financial goals, your travel habits, and the specific benefits offered by each card. This way you can make informed decisions that will help you optimize your credit card strategy and maximize your rewards.

To dive deeper into the world of credit card optimization and learn more about specific strategies for maximizing your rewards, I highly recommend checking out my Easy Three Year Plan to Earn 1.5 Million Points. I’ve outlined a detailed roadmap for opening and closing credit cards to optimize your rewards. By following this plan, you can streamline your credit card portfolio and unlock significant travel rewards.