What Do I Do With a Card I Don’t Use?
Hopefully after reading some of these articles you’ve started to reevaluate your credit card portfolio and have realized you can pick up some new cards to maximize your return on spending! However, that begs the question: What should I do with my old card?
Before we can answer that question there are a few more things we need to think of.
Why am I not using this card?
Is there an annual fee?
What benefits are there just by holding onto the card?
Do I have points that will get stranded?
What impact will closing this card have on my credit score?
Can I downgrade my card?
Why am I not using this card?
There may be a couple reasons I have a card that I’m not using anymore so I may be considering cancelling it. It could be that first credit card I got from my local bank when I first went to college or I could have realized there are better options out there to put certain spending on. If you have a better or more efficient option to put spending on, go all in on that card. You’re leaving points and by proxy, money on the table by not using the best card you can.
Is There an Annual Fee?
If there isn’t an annual fee, I would almost always recommend keeping the card open. It seems counterintuitive but the more available credit you have the better your credit score will be. Having that additional open line of credit will only help your credit utilization ratio. Check out this post on what goes into your credit score.
However, if there is an annual fee, it might be time to do some math and figure out if it is worth having the card. Say you have both the Chase Sapphire Preferred ($95 annual fee) and the Chase Sapphire Reserve ($550 annual fee, but effectively $250 after the $300 annual travel credit) but don’t put a ton of spending on airlines each year. Both cards offer almost identical benefits with the exception of 3x on travel with the Reserve vs. 2x on travel with the Preferred. Is it worth paying effectively $155 more a year to have the Reserve?
While the Reserve has some additional perks like a Priority Pass membership and a Global Entry credit once every 4 years, if I already have those benefits elsewhere or don’t use them, its a pretty straightforward equation. If you value those benefits, add in their value to the annual fee difference. I would need to spend $9,117.65 a year on travel to just breakeven on the higher annual fee compared to the additional points I would earn. $155 (annual fee difference) / 0.017 (value of Chase points) = $9,117.65. If you’re spending over $9,000 a year on travel, you need to consider other cards to begin with. The Amex Platinum is the best for airfare while the Citi Strata Premier is one of the best for hotels.
What Benefits Do I Get By Holding the Card?
From super premium cards to mid-tier cards, you can get a lot of perks just by having the card. For example the Amex Platinum has over $1,284 in credits just for having the card compared to a $695 annual fee. While the Amex Marriott Bonvoy Brilliant has a $650 annual fee but only $300 in credits each year. However, I also get Marriott Platinum status just for holding the card as well as an 85,000 point free night certificate, Global Entry fee credit, access to Amex Offers, etc. So these benefits all outweigh the annual fee to me.
If your card has an annual fee with not many or any perks, it might be time to consider getting rid of it.
Do I Have Points That Will Get Stranded?
Stranding or forfeiting points is a serious concern when it comes to cancelling a card. The good news is that with a co-branded airline or hotel card, those points get instantly deposited into that account. If you cancel the credit card, those points typically stay put.
Now, if you have a bank card with transferable points, you are at risk of losing them. If you cancel the only card you have with that bank, they will take those points after they cancel your account and there’s really no recourse for you as the consumer. Either use them before you cancel or you’ll lose them.
However, if you have another card in that family, all the points get pooled together. So if you have the Amex Platinum and the Amex Gold and cancel the Platinum, you get to keep all your points.
Will Closing the Card Impact My Credit Score?
Closing a credit card can actually impact your credit score. You’ll lose not only that available credit line but also it will change the average age of your credit. This shouldn’t be a huge impact but if you don’t have a lot of total credit or you close your oldest card, this could be a serious impact to your credit score. My dad has an Amex card that he opened in 1993 with an annual fee that he happily keeps around for the positive impact it has on his credit score. It also doesn’t hurt that he makes up for the annual fee with access to Amex Offers.
Can I Downgrade My Card?
If the card you are considering cancelling has a no annual fee version, consider asking to downgrade your card to that option. Your card number stays the same and the credit line on your report doesn’t change. The only thing that will change is the fee you pay and the perks you get. This is often the best option for you if its available.
Retention Offers
After walking through all of the potential reasons to keep a card open but you still decide you want to cancel it, you still probably have another option that you may not have thought about or even knew was an option.
If I have sock drawered a credit card I no longer use and want to call up the bank to cancel, I always ask to be connected to the retention team. It is away cheaper for any company to retain business than to go out and find new business. Because of this, most banks will provide you with an incentive to keep their card open another year.
Some banks are more generous than others. American Express is generally the best with Chase being the worst. Retention offers vary greatly from issuer to issuer, from credit card to credit card and especially from individual to individual.
What Retention Offers Can I Expect?
This all depends on the bank, and the card you have. There’s no rule for each card to know what to expect. It really is up to an algorithm which incorporates your specific spending habits and how profitable they think you are. There are a couple of different retention offer types and you may even get a few choices when you call in. If you get multiple choices, be sure the know exactly what it would take to keep the card another year before you call in.
Waived annual fee- this could obviously be the best scenario. You keep the card another year and don’t have to pay the annual fee with no strings attached. This happened more during the pandemic but more so now issuers will offer to waive the annual fee if you spend a certain amount of money in a certain number of months.
Bonus Points or a Statement Credit- these are two options that come up a lot and require you to be good at math on the fly if you’re offered both. You may be offered $100 statement credit after spending $1,000 in 3 months or 10,000 bonus points after spending the same $1,000 in 3 months. If you’ve been reading this blog for any amount of time you know that I value most points more than just 1 cent per point. So for any bank issued card, I would generally take the points as they are worth more. If you’re only offered one, you have to be able to decide if this incentive outweighs the annual fee.
Nothing- This is the worst case scenario and the bank isn’t going to offer you anything to keep the card. Do you call their bluff and cancel the card? Most of the time when this happens to me, I say I’m going to think about it some more and let them know I’ll call back later.
When is the Best Time to Call in About A Retention Offer?
I typically call in the week or two before the annual fee hits or right after it does. The worst they can say is that they have no offer for you. One thing to note is only ever tell an actual human that you are considering cancelling a card! If you tell a bot there’s a chance they might go ahead and cancel the card which is never good.
Wrapping Up
There’s a lot to consider when thinking about cancelling a credit card but hopefully with these tips you can have a better idea of what to expect when the time comes. Are you lucky enough to get a retention offer? If not, just hang up and call again to see if you get someone else.
The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
