When to Cancel a Credit Card
One question we get from folks interested in award travel is: “Do you ever cancel your cards? What do you do with them?!” It’s a bit of a complex question, but let’s break it down! This is how we approach whether or not to cancel a card, and also knowing when to do it.
Has the card been open for at least one year?
First and foremost, we always keep our cards open for at least one year. Based on our research and experience, closing a card too early—especially before the one-year mark—can negatively impact your credit score and signal to banks that you might not be a reliable cardholder. We avoid this to protect both our credit score and our relationship with the banks.
Does the card have an annual fee?
If the card has an annual fee, we wait until the fee posts after that one-year mark. Once it does, you generally have about 30 days (or until your next monthly statement is due) to decide whether to keep or close the card. I’ll dive into how we approach that decision below.
If the card doesn’t have an annual fee, we usually keep it open—it’s free to hold onto, after all! However, if it’s a card we want to apply for again in the future to earn another welcome bonus, we may decide to close or downgrade it (but, again, never before the one-year mark).
Are the card benefits still valuable?
Sometimes, even a card with a higher annual fee can be worth keeping if the benefits are worth more than the cost. This is a personal decision, of course, and it depends on how much you’re using the perks.
For example, we have the Capital One Venture X card, which comes with a $395 annual fee—pretty steep at first glance. But it offers a $300 annual travel credit through the Capital One Travel Portal, which we always use for rental cars (we prefer not to use points on car rentals). Plus, it gives us airport lounge access, which is a huge perk when traveling with kids. The card also provides a $100 credit for TSA PreCheck or Global Entry, and it earns 2x miles on all purchases, making it an ideal everyday card. For our family, these benefits more than justify the fee, so we plan to keep this card long-term.
Is there an option to downgrade?
In some cases, downgrading a card to a no-annual-fee option makes sense. This allows you to keep the line of credit open and maintain your credit history without paying the fee.
Take the Chase Sapphire Preferred—our favorite card—as an example. It has a $99 annual fee, and you can earn the welcome bonus every four years. If you’re approaching that four-year mark and want to apply for the card again, you could downgrade it to the Chase Freedom Flex, which has no annual fee. After waiting about 30 days, you could reapply for the Sapphire Preferred and take advantage of the bonus once more.
Is the annual fee just not worth it?
Sometimes, a card’s welcome bonus is reason enough to apply, but after redeeming the points and holding onto the card for at least a year, you may decide the ongoing benefits aren’t worth the fee.
For instance, we applied for the JetBlue co-branded card to build up a stash of points since JetBlue flies to a few key destinations from Pittsburgh. It has a $99 annual fee. Once we use the points earned via the welcome bonus, though, we’ll likely cancel the card because JetBlue isn’t a major airline here. In this case, the card was worth having for the bonus, but not for the long term.
Conclusion
After the one-year mark of holding a credit card, you should evaluate whether you want to keep, downgrade, or cancel the card. Truthfully, we don’t cancel many cards because we tend to find value in the benefits, even with annual fees. That said, it’s a personal decision based on your own travel habits and financial goals.
If you’re interested in opening a new card, we’d so appreciate you using our referral links. It won’t cost you anything, but it gives us a few referral points to add to our stash.
Thank you in advance! We’re here if you have any questions!
❤️ Liz
Friendly reminder: We are not financial advisers, we are simply sharing our method and approach with you. Of course, it's important to use credit cards responsibly. Pay off your balance in full each month to avoid interest charges, and never spend more than you can afford just to earn rewards.
