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This is the fourteenth post in a monthlong series that started here. Each post will take about two minutes to read and may include an action item that takes the reader another two minutes to complete. I am writing this for an audience of people who know nothing about frequent flier miles, and my goal is that by the end, you know enough to fly for free anywhere you want to go. Previously Other Credit Card Benefits.
Credit cards are the gift that keeps on giving. A single card gives you so many benefits: a huge sign up bonus, some category bonuses along the way, and other ancillary benefits. There may be one more major source of money or miles in your card though: credit card cancellation negotiations.
Credit card companies want you to keep their card. If you keep their card, you might spend on their card. If you spend on their card, they make money. So if you call up and mention that you’re considering cancelling their card, the banks will very often make you an offer to keep the card. Let’s go through the whole process.
Almost all the cards in the frequent flier mile game have an annual fee. (Many cards waive the fee for the first year, but almost every card is going to charge you a fee twelve months in.) Before this annual fee comes up, I cancel the card unless holding or spending on the card represents incredible ongoing value.
How to Determine Whether to Cancel a Card
It’s a straight cost-benefit analysis.
The cost is the annual fee.
The benefits are the ongoing benefits that I talked about yesterday. Does the card get you a free checked bag on a roundtrip worth $50? Does the card get you a 10% rebate on awards up to 10k miles a year worth about $180?
Add in to the benefits the number of extra miles or points your card will earn you based on how much you expect to spend on the card and its category bonuses. For instance, the Chase Sapphire Preferred offers 2x points on dining and travel. I recently kept the card and paid its annual fee. Among other reasons, I expect to spend $5,000 in those categories on the card this year. That’s 5,000 more points than if I put that $5,000 on another card. I value the extra 5,000 Ultimate Rewards enough to keep the card and pay the fee.
How to Cancel a Card
If you’ve determined that you don’t want to keep a card through its next annual fee, you need to cancel the card. Do not cancel a card within six months of getting it. You will get a bad name with the credit card company. Hold the card until you’ve had it about eight months.
Eight months after getting the card, with four months until the annual fee, I call the number on the back of the card.
When I get a human on the phone, I say politely, “I’m calling to cancel the card. I’m concerned about the annual fee.”
The representative may agree and allow you to cancel the card without offering you anything. In this case, I would hang up without cancelling the card. Maybe calling back in a week or a month will net a retention offer.
In most cases, though, the representative will offer you a deal to keep the card. The deal may take several forms. To keep my Citi AA Amex, I was offered an $85 statement credit after five purchases of any size. To keep my Citi AA Visa, I was offered 3 miles per dollar spent for the next six months.
After the representative offers you a deal to keep the card, ask if there are any other offers. If they offered me a statement credit, I usually say, “Are there any miles offers?” And vice versa.
I then take a minute to consider which offer is best among my choices. Of course, to answer that, you need to have a value for the mile in question. I think the offers that give extra miles per dollar on all spending for several months are usually the weakest offer. A one time cash or miles bonus is better because it lets me focus my spending where I’m getting way more than a few miles per dollar: clearing new sign up bonuses.
I make the call about eight months after getting my card. The reason I do it four months before the annual fee is due is that sometimes I don’t get a retention offer, so I want to be able to call back later to see if I can get one. Also sometimes it takes a month or two for the retention bonus to post. And I want the retention bonus to post before the annual fee is due because the final step may still be cancelling the card.
If you have a retention bonus post, you may still want to cancel a card. If you still want to cancel the card, call back to do so.
You may want to downgrade your card to a different version of the same card instead of outright cancelling. This has the effect of keeping the average age of your accounts–a component of your credit score–higher. But this could stop you from getting certain sign up bonuses in the future.
So I usually just cancel cards outright. Before the card is cancelled, I ask to have the credit line moved to another card issued by the bank. I never want to give up credit that’s been extended. I can use that credit in future reconsideration calls.
Example: You have a the Citi American Airlines AMEX with a $6,000 credit line and the Citi Forward card with a $6,000 credit line, and you’re cancelling the AA AMEX. Ask to have the $6,000 line moved to the forward card, giving you a $12,000 line there.
The reason you want to do this is that part of your credit score is determined by what percentage of your credit line you’re using. Decreasing your total credit line will increase the amount of your credit line you’re using thus lowering your credit score.
Continue to Keeping Miles Active with Dining Programs.------------------------------------------------------------
Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.
The Chase Sapphire Reserve comes with 100,000 bonus Ultimate Rewards after spending $4,000 in the first three months that you can transfer to United miles, Singapore miles, Southwest points, British Airways miles, or use for 1.5 cents each toward any flight, hotel, or car rentals.
Plus the card offers $300 in credits toward any travel purchase each calendar year, which is $600 in your first 12 months of cardmembership, $100 toward Global Entry, and worldwide lounge access. Basically it's the best credit card ever, even with a $450 annual fee.