When to Cancel a Credit Card?

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What is the right time to cancel a credit card once you’ve reached your minimum spend and maxed out the sign-up bonus? How do you decide which cards to keep and use to earn points longer term?

Your decision to keep or cancel a credit card should be based on a mixture of factors including your personal spending habits and your mileage earning strategy.

Here are five quick questions to consider when determining if a credit card is worth keeping in your wallet.

1. Is it a “No Annual Fee” card?

If your credit card has no annual fee, there is essentially no cost and no harm to keep the account open. Keeping a card open, even if you don’t actively use it, may actually help your credit score.

2. Do the benefits of your card outweigh the annual fee?

If your card has an annual fee, calculate if the benefits that you receive from the card outweigh the cost? For example, the Chase Sapphire Preferred card has an annual fee of $95. In our opinion, the value of bonus miles an active traveler can earn each year from 2x points for food and travel expenses, plus the savings from not paying international transaction fees make the value of benefits higher than the cost of the card.

If the card pays for itself, keep it.

3. Do you use the extra benefits?

The bonus benefits of the cards you carry are only of value if you take advantage of them. Do you maximize the benefits of your credit card? If not, it may be a card you would consider cancelling. For example, if you have the United MileagePlus Explorer card and use the benefits of priority check-in and free baggage a couple of times a year you should probably keep the card.

However, if you prefer to fly American, it may be time to cancel that United card and apply for a Citi AAdvantage card that will give you extra benefits that you will use for their full value.

4. How long have you had the card?

If you’ve had a credit card account open for awhile, it may be to your advantage to keep the card open as length of credit history is one of several key factors that contributes to your FICO score. If you’re really set on closing a card because you don’t want the card or the benefits any longer, consider asking your bank about how to downgrade the card to one with no annual fee.

5. When is the card’s anniversary date?

The anniversary date of your credit card is the day that you are charged your annual fee and when your card member benefits renew for another year. The best bet is usually to cancel a card right before the anniversary date and not right after you’ve paid the annual fee. Waiting until closer to the renewal date can help your credit by extending the length of the credit line. If you miss the renewal date and accidentally pay the annual fee on a card you meant to cancel, you can try asking the bank to reimburse a pro-rated amount based on the number of months when you do cancel.

One you determine that it’s time to cancel, the process is as simple as dialing the number on the back of the card and saying goodbye. Be aware, however, that the bank may to offer you a bonus to reconsider like additional miles or a statement credit for your annual fee. It’s okay to reconsider and accept a good offer. It’s also okay to call back in a couple of months and cancel the card that you don’t want.