The Citi Premier® Card is no longer taking new applicants, although existing cardholders can still use their cards. Those interested in applying for this card should check out the Citi Strata Premier℠ Card instead.
Key takeaways
- Canceling a credit card can be an important step in optimizing your credit card strategy if you no longer see value in a credit card.
- You can minimize the negative impact on your credit score by canceling newer cards rather than accounts you’ve had open for years.
- If you want to avoid high annual fees on an older card, downgrading to a no-annual-fee version is a great way to preserve your credit line.
Credit cards are an incredibly powerful financial tool that can help you build credit, earn rewards and even check off that bucket list vacation for a fraction of the cost. I’ve personally used dozens of credit cards over the years to travel the world. I’ve also canceled my fair share of cards that lost their appeal and were just not worth the annual fee anymore.
Canceling credit cards can be integral to a good rewards strategy. Of course, you want to be thoughtful about it and make sure doing so doesn’t hurt your credit or long-term rewards goals. With that being said, here’s how to decide which credit cards to cancel and how to do it while minimizing any negative impact.
What to consider before canceling any credit cards
Before you cancel a credit card, it’s important to be aware of the repercussions on your credit profile and rewards balance. Here are four factors to consider before canceling a credit card:
How can canceling a card impact your credit?
The impact of canceling a card depends largely on the account age and your overall utilization rate. If you cancel a newer card, you’ll see a drop in your credit score. This change is often temporary and will recover as you practice good credit habits.
On the other hand, canceling an older card can have a negative impact in the long run. That’s because your average account age, which is responsible for about 15 percent of your credit score, will decrease.
What happens if you cancel a card with a balance on it?
If you cancel a card with a balance on it, you’re still responsible for paying it off at the existing interest rate. However, closing a card with a balance means you won’t be tempted to spend on it anymore, and you’ll no longer pay the annual fee. Depending on which credit card you have, the savings could be hundreds of dollars.
What happens to rewards on a canceled card?
When canceling a credit card, you will typically forfeit any unused rewards. Some banks provide you with a grace period to redeem unused rewards, while others do not. If you have a sizable point balance, you could lose out on hundreds of dollars in value by canceling your credit card before redeeming your points.
Here’s what will happen to your points in some of the most popular rewards programs:
- American Express Membership Rewards: Points are forfeited immediately when you cancel your last Amex card.
- Capital One: Capital one miles are forfeited immediately when you cancel your last Capital One card.
- Chase Ultimate Rewards: Allows 30 days from account closure to redeem points.
- Citi ThankYou Rewards: Allows 90 days from account closure to redeem points.
If you have another rewards-earning credit card, your bank rewards points are typically safe. Some banks allow you to transfer points to another member. For example, before I canceled my Citi Premier® Card*, I transferred my unused points to my mom’s Citi ThankYou account — free of charge. She then had 90 days to redeem the points before they expired, so I transferred them to her Avianca Lifemiles account and used those miles to book myself an award flight. Be sure to review the exact policy on your card to ensure you don’t miss out on rewards.
5 types of credit cards you should consider canceling
If this has you reconsidering your current credit card strategy, that’s good! You should constantly evaluate your credit cards and make sure they’re working for you. So what, exactly, should you look for in a credit card? Above all, a credit card should be rewarding and in line with your financial and travel goals.
With that in mind, these are the five types of credit cards you should consider canceling:
1. Cards you don’t use
If you’re not using a card, it might be time to drop it. Credit utilization plays an important role in your credit score, and not using a card isn’t calculated favorably. If you’re not regularly swiping your card and earning rewards, you should consider canceling it.
2. Cards with high annual fees
Credit cards with high annual fees often come with premium travel perks. Sometimes, those perks aren’t quite as useful as anticipated. If you find yourself letting credits expire or spending more to take advantage of an airline fee credit, then it may be time to re-evaluate whether you need that card in your wallet.
Not all rewards credit cards are worth their annual fees, and if you can get similar benefits at a lower cost, you should explore that option. For example, people who want to earn bonus points on grocery spending often go for the American Express® Gold Card. But the card has a $325 annual fee, which may not be worthwhile if you’re not making use of its various perks.
If you want to earn bonus points on grocery spending, you might want to switch to the Citi Strata Premier℠ Card, which has a $95 annual fee and earns 3X points at supermarkets and other categories. The rewards rate is pretty close to Amex Gold. Plus, many of their transfer partners overlap, and the annual fee is lower.
3. Cards with repetitive benefits
The credit card landscape has become increasingly competitive, with lower annual fee cards like the Capital One Venture Rewards Credit Card and Chase Sapphire Preferred® Card offering benefits on par with premium credit cards. If you have multiple credit cards in your wallet offering overlapping benefits such as Global Entry or TSA PreCheck credits, it may be time to consider canceling one of those cards.
Why shell out hundreds of dollars in annual fees every year for benefits you could be getting cheaper elsewhere? It’s definitely worth evaluating your current credit card line-up to determine which benefits are repetitive and which card(s) you can downgrade or drop.
4. Cards with benefits that are costing you
It’s easy to get caught up in the value of credit card benefits and think, “I’m getting my money’s worth!” Be honest with yourself about the value of these perks and what they’re costing you.
For example, if you’re paying more to stay at Hilton hotels to use the Hilton Honors American Express Aspire Card’s* annual Hilton resort credits, then the card’s $550 annual fee may not be worth paying. You might be better off canceling the card or switching to the Hilton Honors American Express Surpass® Card for practical benefits at a lower annual fee.
5. Cards that aren’t rewarding
Having a travel rewards card should be rewarding. Take a look at your spending over the last year and think about your upcoming purchases. Does your credit card offer meaningful bonuses in these spending categories? If not, you might be due for a change. If you’re not earning maximum rewards on your biggest spending categories, it might be time to cancel and get a different card.
For example, I consider The Platinum Card® from American Express one of the best cards for travel — mainly because of the statement credits and lounge benefits offered. But, if you don’t spend enough to take advantage of those card perks, it might not be worth the $695 annual fee.
The type of rewards you’re earning is just as important as the rate at which you’re earning them. If you’re no longer getting value out of your Amex Membership Rewards points, then it might be time to switch to a card that earns one of these:
Alternatives to canceling a credit card
Canceling a credit card outright isn’t the only course of action if the card is not working for you. You can also downgrade or reallocate your credit limit.
Downgrading your card
Downgrading your card might be a better move, especially if the card you’re looking to drop is one of your oldest accounts. This way, your credit history stays intact, and you get a card that suits your spending habits better.
For example, many people who no longer feel served by the Chase Sapphire Preferred® Card will downgrade to the no-annual-fee Chase Freedom Unlimited®. They save $95 per year and earn 3 percent cash back on popular spending categories like dining and drugstores. These folks might also prefer the simplicity of a cash back card over a complicated rewards program.
Keeping a card with no annual fee is easier to justify than one with an annual fee that doesn’t fit your spending habits and travel goals.
Will unused credit cards affect your credit score?
If you downgrade your card and don’t want to actually use the new credit card, can you just keep it without using it? You can, but your bank might shut it down for inactivity. This can hurt your credit score if the credit line was substantial or if it involved your oldest credit card.
To avoid having your card shut down for inactivity, consider charging something simple to it each month, like a streaming subscription. You can then set up autopay so you don’t forget to pay off your card. This is a great way to put minimal spending on a card without channeling large expenses away from a more rewarding credit card.
Reallocating your line of credit
If you want to cancel a card and have multiple accounts with that bank, consider allocating the credit line to another card. For example, if you have a card with a high annual fee and a card in the same family that has low or no annual fee, you can call up the issuer and ask to move the first card’s credit line to the no-annual-fee card. This way, your utilization rate won’t be impacted when you cancel the more expensive card.
How to cancel a credit card
You can cancel a credit card by calling your bank and speaking with a customer service agent. Some banks even allow you to cancel through secure messages or chat conversations. I’ve had success canceling Citi cards through the secure messaging center. Meanwhile, American Express made it super easy to cancel my Marriott Bonvoy Brilliant® American Express® Card via chat when that card lost its appeal to me.
Don’t forget to double-check
Once you cancel a card, be sure to log into your account after a few days and confirm it has been either removed or labeled “closed.” I had a bad experience after canceling a Citi card, only to find out a year later that it had not actually been canceled. I wound up accruing late fees after failing to pay the annual fee. It took some effort to clean up my credit report after that incident. Don’t fall into the same trap.
The bottom line
Re-evaluating your credit cards is key to a good rewards strategy, and canceling a card can be a good move. After all, if a credit card ceases to be worthwhile, you don’t want to continue paying an annual fee or letting it take up space in your wallet. Rewards cards are supposed to be rewarding, and if they’re not, you should feel empowered to cancel or downgrade them.
Consider the account age and alternatives before giving any credit card the ax. If you decide to cancel a card, do it the right way. With these tips, you should be well-equipped to do so.
*Information about the Hilton Honors American Express Aspire Card and the Citi Premier® Card has been collected independently by Bankrate. The card details have not been reviewed or approved by the issuer.
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