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Points of View: Should I cancel or reduce my credit card?

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Your credit card annual fee is due. For one reason or another, you decide it’s not worth paying a fee to keep your card for another year. Or maybe it’s a credit card you’re not using, so you’re considering closing the account, and your first goal may be to cancel your card. However, there are other options: you can downgrade or change your card instead of the product. Wondering what these options are and how they work? Let’s take a look at what goes into the decision. Then you can make an informed decision to cancel your credit card, downgrade or change product. Kind of rewarding but with a lower (or no) annual fee. Here’s an example: I previously held a United Explorer card but didn’t travel much, so the $95 annual fee (which was waived for the first year) wasn’t worth it to me. I’ve downgraded this card to the United Gateway Card, which has no annual fee. Related: When can you reduce your credit card? I lowered my card but didn’t need to open a new one. I also kept my credit history with this card, since it counts as the same account on my credit report. It should be noted that not all cards have downgrade options. For example, you can’t downgrade an IHG Rewards Premier Business credit card. This is because there is no other IHG business credit card, and you cannot change between personal and business credit cards. A change means replacing your existing card with a card that earns a different type of reward. It differs from downgrade, which means switching to another card within the same family, i.e. earning the same type of rewards. Just like with downgrade, your account history is preserved since you don’t cancel your credit card. You can also choose a card with a lower annual fee, if that’s your goal. A card that earns a completely different kind of reward. For example, you change your Air France KLM World Elite Mastercard® product to a Bank of America® Unlimited Cash Rewards credit card. In another case I changed a Citi®/AAdvantage® Platinum Select® World Elite Mastercard® to a Citi Costco Anywhere Visa® Card I was able to maintain my credit history by keeping my accounts open while changing to a card that cost me nothing to keep it open year after year Public. The information on the Air France KLM Mastercard has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer. Policies vary by bank, but you should receive a refund of your annual fee (or at least part of it) if you cancel your card within 30 days of the annual fee being posted. Cancel your card or leave it open with a downgrade or product change Consider the following: How long have you had this card? You should never close or change a credit card before you have had it for a year. Additionally, if this is one of your oldest credit cards, maintaining your credit history is helpful. What are the options for downgrading or changing the product? If you can’t change your current credit card to another one, that reduces your options. Know in advance what options you have to streamline your data retention phone call, if you change to another card, could this limit your ability to receive a welcome bonus in the future? With American Express in particular, you may be prevented from receiving a welcome bonus if you had a card in the past – even if you only had that card after a product change and you didn’t get a welcome bonus on that card. Need to close a card with this bank? Banks such as American Express and Capital One have limits on the number of credit cards you can have with them at any one time. If you are at the limit, you may need to close the card before you can unlock new cards and get welcome bonuses on it, and if you close this card, can you replicate its benefits with other cards? You should not close or reduce the only credit card that gives you airport lounge access unless you are willing to give up this benefit. Make sure you know the benefits of your card and if you are going to miss out on anything important. What offers would you accept to keep this card for another year? Think about the possibilities in advance so that you know what retention offers you may and may not accept. Will you lose your points or miles? If your card earns hotel or airline points, any points already transferred to your loyalty account are safe. If you earn points from the bank’s program, you may lose points if you do not have another card that earns the same points. Whatever you decide, it is important to remember that you are still responsible for paying any balances on your card. Additionally, you should check your closed accounts to make sure there are no unexpected charges. It is kept, sealed, and changed to a different card. There are many factors that go into deciding whether to cancel, downgrade, or change a credit card. Now, you can make an informed decision about which cards will earn you a place in your portfolio for another year. Editor’s note: Vision Score is a series for evaluating decisions about which credit card to use. If you’re having a dilemma as to which card is best for an upcoming batch, email us at tips@thepointsguy.com with the subject line: “Offer Points Question.” Also in this series:

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