Should I Cancel My Credit Card?

Alex

Maybe you’ve had a card for a while and you don’t ever use it, or you used to use this credit card but now you don’t feel the annual fee is worth it. Maybe you signed up for a credit card just for the signup bonus and never had the intention of keeping it beyond that first year. You may be asking yourself, what do I do now? Should I cancel my credit card? Should I keep it? Can I downgrade it to another card? What even is downgrading?! Well, you are in luck because I am going to answer all those questions for you!


When to Keep Your Credit Card

  • Always keep your card if it doesn’t have an annual fee. I keep these cards open, even if I never use them anymore. One time years ago, before we were credit card whizzes, my husband went into our local credit union to close a credit card that we’d had for years but were no longer using. The card had no annual fee but we figured since we didn’t use it we might as well close it, right? WRONG! Luckily the banker explained to my husband that it would actually be worse for our credit if we closed this account. If we closed this card our credit utilization would go up and our average age of accounts would go down, two things that can bring your score down. If you are unsure what I am talking about then check out my beginner’s guide and scroll down to the part about credit scores.
  • Another reason you might keep a card is that the benefits that come with the card outweigh the annual fee. That is the case for me with my Chase Sapphire Preferred Card. I get so much value out of this card that I don’t ever see myself not paying the $95 annual fee to keep it. I also keep most of my hotel cards because I get a free night certificate each year that is worth at least double (or more) my annual fee.

 

When to Downgrade Your Credit Card

Downgrading is when you change your credit card to a different card that doesn’t come with an annual fee. When I decide I don’t want to keep a certain card the first thing I look into is if there is an option to downgrade to another card so I can keep the account open. For example, we didn’t want to pay the annual fee on my husband’s Chase Ink Business Preferred Card again so we called into the bank and downgraded it to the no-fee Chase Ink Business Cash. It won’t look super stellar on your credit account if you open up 10 cards and close 9 of them in the same year. I try to not cancel more than half of the cards I open. But, I don’t want to pay an annual fee on a bunch of cards either. Here are some reasons you might downgrade:

  • You want to cancel the card but there is a no-fee version you can downgrade to instead.
  • You’ve had a card for a super long time and don’t want to cancel because you don’t want to bring down your average age of accounts but you also don’t want to pay the annual fee anymore as you don’t value it like you used to.
  • You want to get the signup bonus on this card again but you can’t apply for the card again if you currently have it. You downgrade it because you don’t want to have too many closed cards on your account.

 

When to Cancel Your Credit Card

Before you cancel, it may be worth calling the bank and speaking with someone from the retention department and seeing if they have any retention offers. This can be anything from waiving the annual fee to offering you points if you spend a certain amount on the card. Here are some reasons you might cancel a card:

  • You don’t value the benefits that come with the card enough to justify the annual fee and there isn’t a no-fee card you can downgrade to.
  • You want to get the signup bonus for this card again sometime but you can’t have this card and apply for it at the same time. For example, after having my Southwest card for a year I went ahead and canceled it (there isn’t a no-fee card to downgrade to). I then have to wait 24 months from when I received my bonus but then I can apply for the card and get the bonus again.
  • The bank offered you a retention bonus but you don’t feel the offer is worth keeping the card and paying the fee.

 

Conclusion

What it all comes down to is saving yourself some money and making travel a little easier. If your annual fee cards are doing either of those things for you then hang on to them. If you don’t feel like your annual fee cards are serving you well, then look into downgrading or canceling. Doctor of Credit has a helpful post about downgrading and shows you some of the cards you can downgrade to. Another easy way to find out if there is a card you can downgrade to is to call the bank and ask. And as always, contact me if you have any questions 🙂 And remember, don’t cancel those cards you have had for years and years!

 

man cutting up a credit card

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  1. Lindsey says:

    Hey! Love your posts…just stumbled upon you on IG. Quick question…which cards are your main ones you cancel after a year, wait two years, and then sign up again? I see the Southwest one was mentioned, but just curious about others that are better to cancel and re-apply for that sign up bonus again.

    Thanks!

    • pamiorg says:

      We haven’t had to cancel and sign up again much because there are always new cards to get. I live near a United Airlines hub in Denver so we have reapplied for the United Explorer. Alex’s husband reapplied for the Chase Sapphire and we will definitely do that again but it is a 48-month wait 😩. It is our favorite beginner card and we love Ultimate Rewards. Will probably do that for the Chase business cards too.

  2. Sarah says:

    Hi. So what if I want to cancel the card with no annual fee? Will that affect my score, or do I just say to upgrade it instead back to the one with annual fee? Help!

    • Pam says:

      We aren’t financial experts, but we do occasionally cancel cards, maybe one or two a year, without it affecting our scores. I usually just keep the cards with no annual fees until I can reapply for them.

  3. Heather Craven says:

    I have a Capital One Walmart card and a Quicksilver card I have had both for several years. I read that Capital One only allows you to have 2 cards at a time. I want to get the Venture X or similar. Should I cancel one of the cards since I never use them. I don’t want to ruin my credit though either by canceling a card I have had for a long time.
    Thanks for the advice.

    • Pam says:

      I would go ahead and cancel the Walmart card so I could get the Venture X. Then keep the other card you’ve had for a long time. Remember, we are not financial advisors, though. That is just what I would do. If you have a good credit score, it should be okay.

  4. Chryslin Conley says:

    If you downgrade a card to the 0 annual fee card, does that mean that you can get the signup bonus again if you go back to the original card you had?

    • Pam says:

      You can get the signup bonus again when the time for reapplication occurs. For instance, you have to wait to reapply for a Chase Sapphire Preferred 48 months from when you received the bonus.

  5. DAWN says:

    Hi there!! Your posts are so helpful! I just got the sapphire preferred and met the minimum spend to get the bonus. My husband already has the same card and has had it for longer and I’m on that account too. Trying to figure out when to cancel? Why wait a year? And if I do wait a year is that when they charge the annual fee at a year? Thank you for the help

    • Pam says:

      We wait a year because it looks better to the banks. As long as you wait till the fee posts, you have 30 days to pay it so you cancel and they reverse the fee.

  6. Rachel says:

    Love this post! I’m wondering, if I downgrade a card (like the United Quest) to the $0 annual fee option after a year, does that mean that I can’t apply/get the sign up bonus for that $0 fee card? Or is it a better strategy to get the $0 card first and keep that forever, and then later sign up for the higher end version of that card (and ideally downgrade it)?

    Also, do you know the policy to reapply for other cards not from Chase? (like the AA card from Barclays)

    Thanks for the advice!!

  7. Laura says:

    Curious, if you downgrade from the chase sapphire to the flex and then reapply for the sapphire for points, can you downgrade to the flex again since you already have the card?

    • Pam says:

      Only if you had cancelled the flex and waited 24 months between when you got the sign up bonus, I believe.

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