So, you and your rewards credit card have decided to go your separate ways. It happens. Presumably, you’ve taken a good look at your spending habits and the rewards you’ve accumulated – before you reached your final decision that your rewards card isn't working for you.
There is no one-size-fits-all solution: the best rewards card is always the one that suits you and your lifestyle. But before you break out the scissors, there are a few do’s and don’ts you should know to ensure that the cancellation goes smoothly and that you don’t lose any of your hard-earned rewards in the process.
What to Do Before Closing a Rewards Credit Card
1. Get your payments in order
Most credit card issuers don’t like unfinished business, so they’ll require you to pay off any remaining balance in full before closing your account. That also includes any pending transactions yet to appear on your statement.
And don’t forget about any automatic payments that you have set up on your rewards credit card. Be sure to make new arrangements with those companies so you don’t miss any payments. You may also be able to transfer your balance over to another credit card.
2. Read the fine print
Get out your reading glasses and go over the terms of your cardholder agreement. If you paid an annual fee for your card, it’s important to check what happens to the fee you paid in the event of cancellation before the year is up.
You may be entitled to a rebate for any unused portion, and where you are in your billing cycle is important.
If there’s no chance of a rebate, you may get more value by keeping the card for the rest of the year. At least you’ll be able to earn a few more points/miles before you cancel.
3. Talk to the issuer
Credit card companies aren’t happy about losing loyal customers, so even though you’ve already made the decision to close your account, let them know why when you call to cancel.
If you feel like the annual fee is too high, tell them, and you may be able to get it waived for the upcoming year, especially if you’ve done a lot of spending on your card. Or, they may offer to throw a few bonus miles your way to keep your business. It doesn’t hurt to try and negotiate — there’s nothing to lose — but don’t go into the call expecting to get offered an incentive to stay. It doesn’t always happen.
What Not to Do Before Closing a Rewards Credit Card
1. Don’t leave rewards on the table
Luckily, in most cases, once you’ve earned points or miles on your credit card, they’re yours to keep even if you cancel the card. If your card earns you rewards with a hotel or airline program, those points/miles get deposited right into your frequent flier or hotel loyalty account and can’t be taken back. Still, always ask the issuer to confirm what happens to your points/miles after the card is canceled.
Canceling a credit card run by a bank or credit card issuer can be more complicated. When canceling cards from Chase Ultimate Rewards, American Express Membership Rewards and Citi ThankYou Rewards, you may indeed forfeit your earned rewards. The easiest way to avoid this is to redeem all your points before canceling.
If that’s not possible, read up on your specific issuer’s terms.
Chase lets you transfer your points to another Ultimate Rewards points-earning card before you close your account. American Express gives you 30 days from the date of cancellation to redeem your Membership Rewards points if you have another, active AmEx card. Citi ThankYou points must be redeemed within 60 days of cancellation, or shared with another member within 90 days.
2. Don’t just cut and run
If you are going ahead with closing your reward credit card, it’s a good idea to talk to the issuer regardless. Cutting up your card is just part of the equation — closing a credit card might affect your FICO score since one of the factors it takes into account is the length of your credit history. Call the 1-800 number listed on the back to notify the issuer and to note that the cancellation of the account was at your request.
It’s a small point, but it's better to have this recorded on your credit report.