Step-by-Step Guide: Getting Rid of a Credit Card

You’ve gone out of your way to earn points with your credit card—you don’t want to lose them, before you get a chance to use them. If you cancel your credit card, it is possible to lose all the points in your account. Fortunately, it is usually straightforward to make sure that you hold onto your points.

If your credit card earns frequent flyer miles or hotel points, you don’t need to worry. The points are earned directly with the the airline or hotel's reward program. Cancelling the credit card doesn't have an effect on your airline or hotel account.

The expiration rules, for these airline and hotel points, are the same as for any other points you’ve earned with the airline or hotel reward program, such as points you earn from flying or staying. They will typically expire after some period of inactivity.

But, since you may have earned a large number of points from the credit card, and you don’t necessarily use the reward program very often, there is an increased risk that you might lose a substantial amount of points due to inactivity. So, you may want to make an extra effort to keep these points from eventually expiring. Keep Your Points from Expiring.

If the card earns cash back, make sure to cash out before you cancel. With most cash back credit cards, you need to take a specific action to cash out the value of your accumulated balance. If the only way to get good value from your points is to use them to purchase travel (or to offset travel purchases), things are more complicated. You'l need to start planning to cash out your points further ahead of time, so that you have a good opportunity to use them for travel purchases. Southwest Airlines lets you easily cancel flights, without an added charge, and receive a travel credit. So, if you are desperate to use your points, you could book a Southwest flight and then cancel it. A few days later, your points will be transformed into a Southwest travel credit.
If the credit card earns points as part of the credit card company’s own program, you;'ll need to be more careful. If you simply cancel your card, you could lose your points. The rules are different for each program:

	Chase Ultimate Rewards. You need to hold onto at least one card that earns Ultimate Rewards points, or you will forfeit your points. Each card has its own points balance. Before you cancel an Ultimate Reward card, you'll need to transfer any existing points to the Ultimate Rewards card that you are keeping. You can freely transfer points between authorized card holders, allowing a couple to keep a single card between them. Unfortunately, Chase doesn't offer any no-annual-fee cards which still allow you to transfer your Ultimate Reward points to airline and hotel partners. If you want to maintain the full value of your points, you are on the hook to pay the annual fee for one of the Chase Sapphire cards (or the Ink Preferred card). Alternatively, you can get (or convert to) the no-annual-fee Chase Freedom, Freedom Unlimited, Ink Cash, or Ink Unlimited card. You’ll hold onto your Ultimate Reward points without continuing to pay a fee, but you will only be able to redeem them for a limited number of more cash-like options (at 1 cent per point) rather than using them for award tickets and hotel nights. However, down the road, you may be able to transfer them back to a new annual-fee-based Ultimate Rewards card, and regain the more valuable redemption options.
	American Express Membership Rewards. With Membership Rewards, all your credit cards should be linked to a single Membership Rewards account. To keep your points from expiring, you just need to keep at least one card that earns Membership Rewards. Like with Ultimate Reward points, you can freely transfer your points between authorized card holders, allowing a couple to keep a single card between them. Ideally, you want to keep a card that also includes the ability to transfer points to hotel and airline partners. Fortunately, you can get (or convert into) the no-annual-fee Amex EveryDay card (or Blue Business Card) for this purpose. Note that some Amex cards are classified as “credit cards” and some are classified as “charge cards”. You can’t downgrade a card from one category to the other. You shouldn’t need to transfer points between cards, before you cancel. However, you want to make sure that the card you are cancelling is indeed linked to the same Membership Rewards account as the card you are keeping (like it should be). For example, before you cancel, you might need to call to get a business card linked to the same account as your personal cards.
	Citibank ThankYou Points. Citibank is the most problematic program. While you can combine your points into a single account, each point is still associated with the card (or banking account) that earned it. If you cancel your card, any points that you earned from that account will expire, 60 days later. You can transfer them to another account holder instead, but that only extends the deadline till 90 days. You can, however, downgrade the card, and hold onto the points. The AT&T Access or ThankYou Preferred card are two good no-annual-fee options. Doing this will let you keep the points you earned, but you WON’T be able to transfer them to hotel or airline partners. If you want to continue to be able to transfer your points, you’ll need to hold onto (or convert into) the Premier or Prestige cards, and continue paying the annual fees.
	U.S. Bank FlexPerks. You may be able to downgrade the Gold FlexPerks Amex to the Select+ Amex. You can transfer up to 20,000 FlexPoints per year to or from another person. This may help, but the annual limit may prevent you from moving all your points. The points from this program will expire 5 years after you’ve earned them, even if you still have the card.
	Diners Club Rewards. Diner’s Club works like American Express, the points from multiple cards should all be based on a single account, and you must keep at least one card, to keep your points. Unfortunately, they don’t have any no-annual-fee cards, so the best you can do is to pay a lower annual fee by converting the Diners Club Elite Card to the Premier Card.
	Barclays Arrival Miles. Barclays only has a single current card that earns Arrival miles, and you will lose your miles, if you cancel the card. Your best option is to use your points to pay for some travel expenses that you need to make, or to make a refundable reservation before you cancel your card.
	Wells Fargo GoFar Points. Like American Express cards, all your Wells Fargo cards should be earning rewards in a single account, and you only need to make sure that you continue to hold onto at least one card. You can transfer points to other people, allowing a couple to keep one card between them. You'll want to hold onto the no-annual-fee Visa Signature card, because it gives you the option of using your points at 1.5 cents each to purchase airfare through Wells Fargo. GoFar points will expire five years after you’ve earned them, even if you still have the card.

An alternative is to “transfer” your points before you cancel. For points that transfer to airline and hotel partners, you can transfer your points to whichever partner you are mostly likely to want to take advantage of later. You’ll lose the flexibility of being able to transfer to different programs, but you can safely cancel all your cards from that bank.

If you don't find the other options appealing, you can usually just use your points to buy gift cards that you can use later. However, in many cases, you’ll get less value from your points if you do so.

Note that if your points do expire, you can always call the credit card company and plead for them to return the points to your account. Sometimes that works, but you are better off just following the rules, and making sure it doesn’t happen in the first place.

Guidelines for cancelling a card

Try to avoid cancelling your “oldest” credit cards. The duration of your longest-held account plays a significant role in your credit report. Try to avoid cancelling this card, unless you have another card that you’ve had for a similar length of time. If your oldest card has an annual fee, which you no longer want to pay, you usually can “downgrade” it to a (different) no-annual-fee card, and still keep the account open. Just call in, and talk to a customer service representative.
Never cancel a Chase 5/24 card—convert it to a no-annual-fee card instead. You won’t be able to get these cards later, so your best option is to convert an existing card you have.
Never cancel a credit card in the first few months. It may take some time before you receive your signup bonus, and you want to avoid canceling, until this is safely in your account. Some cards have terms and conditions that specify a minimum amount of time that the account must be open. If you close it down too early, they may take back the signup bonus. After about 4 months you should be fine. But, we usually recommend that you hold onto the card until the end of your first year anyway. Real experts can sometimes ignore this rule.
Wait to cancel an annual-fee based card, until the end of the first year. Banks don’t like to see their cards being cancelled right away. Plus, cancelling early limits your ability to negotiate with the bank, during a future reconsideration call. For example, if you still have the card, you can offer to cancel it, or transfer some of the credit limit, and eliminate a possible objection to giving you a new card. Plus, even the cards you don’t plan to keep, may have some nice-to-have benefits, that you can take advantage of, at no extra cost, for the entire first year, and even the beginning of the following year.

There isn’t much reason to cancel a no-annual-fee card. It doesn’t cost you anything each year to hold onto the card, and cancelling might lower your credit score a little. Keeping it for the long term may eventually help with your length of credit history. Wait to close any no-annual-fee accounts until you start hearing regularly from credit card companies that you have too many accounts open (as opposed to too many accounts opened recently). At some point, you may want to shut some of these accounts down to lower your overall credit limits.
Always call in to cancel, and see what retention offer you can get. Banks want to keep your business and, if you call in, they will typically offer to give you more points, or waive the annual fee, to keep you as a customer. This “sweetener” can make it worthwhile to keep the card.
If you are using the card for automatic bill payments with some merchants, you’ll need to switch them to another card. You might be using your card to automatically make payments with someone like your cable provider. Make sure to switch these to another card, before you cancel.
Make sure you don’t lose out on use-it-or-lose it annual benefits. Some cards have an annual credit for travel or airline incidentals. If you haven’t used these yet, you should try to do so before cancelling your card.

Getting Your Anniversary Bonus (Just Before You Cancel)

Many cards give you a special benefit, every year you have the card. For example, you'll get another travel credit on the Chase Sapphire Card, or another free night certificate with the IHG credit card.

Most credit card companies will refund the annual fee, as long as you cancel within the first month or so from when the fee is posted to your account. If you wait to cancel a card until a few weeks after you are charged the annual fee, you can receive the following year's benefit, without having to pay the following year's annual fee. In the case of a credit, you would need to quickly make your qualifying purchase, so that the transactions are completed before you cancel.