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For Travel Hackers: How To Properly Cancel A Credit Card

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amex-card-imageFellow Riskologist,

If you know me at all, you know I’m a fan of travel hacking. In the last few years, I’ve traveled to more than 20 different countries on six continents, never paying more than a few hundred dollars in total for travel expenses on each trip.

Travel hacking is what’s made it all possible. More specifically—credit cards. Lots and lots of credit cards. This blog runs on frequent flyer miles!

In the last 4 years, I’ve signed up for about 15 different cards. Today, I still have nearly half a million miles left to get to new places even if I never earned any more.

Side note: I wrote a huge article long ago explaining how I use credit cards to gain hundreds of thousands of miles at a time called Instant Adventure. It explains the process, how to do it, and all the questions about how having tons of credit cards affects your credit score. It’s a full “adventure manual.”

Churning credit cards on an ongoing basis can get a little complicated, but one thing that’s always been pretty straight forward is what to do with a card once you don’t need it anymore:

Cancel it.

I have a checklist I use each time I need to cancel one of my credit cards. Following it ensures that it’s properly closed, I get all the benefits possible for as long as possible, and my credit score remains mostly unaffected.

And today, I added one last step that will keep me from potentially losing hundreds of thousands of miles when I cancel my cards in the future.

Here’s how it works.

When you first receive the card…

First, there are a few important things you need to do long before it’s time to cancel. In fact, you should do these things as soon as a new card shows up in the mail.

Record the date of the annual fee renewal.

Most miles earning cards require an annual fee. This is no big deal, though, because you almost never have to pay it. Instead, the fee is typically waived for the first year.

In that first year, you can gain all kinds of miles, and simply cancel the card before the renewal date.

Since I’m usually carrying 4-5 cards at a time, I like to keep a simple spreadsheet with stats about each card, including when the annual fee will come due.

Create a calendar reminder 1-month before renewal.

In addition to keeping track of all my cards in a spreadsheet, I like to schedule a calendar reminder for myself for 1 month before the fee comes due. This gives me plenty of time cancel the card before the fee is assessed.

It’s easy to forget the date over the course of a year. If you’re late, sometimes they’ll credit the fee back to you when canceling, but I prefer to not pay in the first place!

Before you cancel the card….

Once the annual fee comes due (or whenever you decide), it’s time to cancel the card. But canceling is actually the worst case scenario.

Before you close your account and toss out your card, there are a few things you should try. If you can keep the account open without paying the fee, it will further lower the small impact closing a card will have on your credit.

First, ask the bank to waive the fee.

If the bank knows you’re calling to cancel, they will sometimes offer to waive the fee for another year. If they don’t, feel free to ask for an extension.

Tell them you like the card, but you’re just not in love with the fee. “Can I have another year to decide?”

The banks are playing a long-term game. They know the longer you keep the card, the more you’ll spend on it and the more they’ll make in merchant fees and, if they’re lucky, interest on your purchases. But you know better than to pay credit card interest!

This isn’t always available, but if you’ve spent a significant amount on your card in year (at least $10k), it’s worth asking for. High spending isn’t so hard to do if you follow some of the tricks to make cash-like purchases on your card.

The rules are always different for big spenders. Welcome to the big leagues!

If that doesn’t work…

Ask to convert the card to one with no fee.

If you can’t get the fee waived, the next step is to ask to have the card converted to one that doesn’t have a fee.

Many banks have a card that looks and works just like the fee-based card you have and it’s free to carry. The difference is you often can’t use it to earn miles. At least, not as many.

But this doesn’t matter. By the time you’re at this stage, you’re pretty much done with the card and moving on to other offers.

This is actually the best case scenario. If it’s possible to convert your card into a similar account with no fees, you can keep the account open forever (better for your credit).

When the new card shows up in the mail, cut it up, throw it away, and forget about it!

If you must cancel the card…

If the steps above fail—unfortunately, they often do—you’ll have to simply close the account. This is really no big deal, so don’t be too disappointed if that’s what it comes to.

When you do cancel, though, here are two things you absolutely must do to protect your credit and the miles you’ve earned.

Ask for a “closed by request” note on your account.

Most banks will do this by default, but it looks better on your credit report if it’s noted that an account was closed at your request.

This tells anyone looking at your report you just decided you didn’t want the account any longer and it wasn’t closed by the bank for being irresponsible with your credit or not paying your bill.

New! Ask for confirmation about the status of any earned points.

I never worried about this before, but now that I’ve had a mishap that almost cost me 120,000 miles, I’ll be sure to do it every time I close an account!

You should verify, before canceling, what will happen to the points you’ve earned using the card.

In almost every case, the answer will be, “nothing.” The points you earned will be yours and canceling your account will have no effect on that.

However, there are certain situations where canceling an account may also wipe out all your miles!

I had two nearly identical cards from the same bank—Chase. Last month, I called to cancel one, and they mistakenly canceled the other. Well, the account I wanted to keep open had 120,000 points in it. When I logged in to check on them recently, they were gone!

Holy smokes! Frequent flyer mile robbery! Sound the alarms!

To Chase’s credit, I was able to sort it all out on the phone in about 15 minutes, but there was a moment of terror when I realized what had happened.

Asking this question wouldn’t have helped me in my specific situation—Chase closed the wrong account—but had I asked and been told that my points would be wiped out, I probably would have been a little more careful about making sure they were canceling the right card!

Go forth and reap your rewards…

Some day, I’ll probably get tired of managing dozens of credit cards and dealing with frequent flyer miles. But, for now, they’ve been an incredible way for me to see the world for almost nothing.

Whether you have dozens of cards or just one that you’ll eventually need to cancel, using this guide will make sure you do it the smartest way possible, protecting your credit and your hard-earned miles.

See you somewhere on the other side of the world?

Yours in travel hacking,
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Founder, Riskology.co

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What smart people are saying about this...

  1. Awesome! I’ve never successfully gotten a card “converted” to one with a lower fee. In one case they said there was a card, but that I would essentially have to go through the application process to get it. I said ‘no’. I’ve never asked for the “closed by request” note- I’ll definitely add that to my routine. Also, I’ve found that if the card earns you airline miles, you keep them after closing, but if you’re earning ‘points’ like chase ultimate rewards or american express, you lose them when you close the account. Luckily, these programs usually allow you to transfer the points to an airline. Easy!

    • Hmm. If a fee-free card is available, I’ve never been asked to re-apply. That’s strange!

      But you made the right call. Don’t go through another application to get a card you’re not planning to use. The benefit isn’t there unless it can be directly converted.

      And you’re right about the difference between mileage cards and point cards.

      In some rare cases though, airline cards will have a clause about revoking miles under certain circumstances. It’s never been a problem for me, but it doesn’t hurt to clarify!

  2. For the vast majority of your article I agree. However, after doing a search on “credit card utilization” “Credit card churning” and “are too many credit cards bad”, it suggests:

    1) Don’t church a lot if you plan on making a big purchase soon, i.e. a house, since it can negatively affect your credit

    2) Sometimes length of a card helps with credit card history, therefore I would suggest hanging onto a few cards (with no annual fees) for a long time even if just to show that you’ve had the account “forever”.

    3) Be aware of minimum spending limits. Some cards require you to spend a certain amount (say $1,000 or $3,000) before you get the majority of points. For example, I’ve got offer of 50,000 miles but the fine print says “500 points at first purchase, and the rest when at least $5,000 is spent within the first 3 months”.

    In all of this, very important to read all the fine print. Good article!!

    • Yep, the fine print is important!

      1) I agree, don’t load up on cards before buying a house. That said, I’ve churned nearly 20 cards in the last few years and I watch my credit very closely. It’s never dropped more than 10 points for more than a month or so. It hovers right around 800 no matter how many cards I open or close.

      So, for me, the effect has been minimal and temporary.

      2) Yes, once you have a card, the longer you keep it the better. It’s good to have a card or two that you can keep forever. Utilization is not something I worry about because I have a massive amount of credit available to me, and I use less than 1% of it.

      3) This is where “creative spending” and making “cash-like purchases” comes in handy. ;)

  3. Tyler,

    Great post! This is something that i have in my list to do in 2014. I think that there is a lot of benefit to churning cards especially if you can stay diligent and organized. I do worry about it though and have book marked your hyperlinked post above to read more. Any tips for getting started and keeping it simple?

    Thanks,
    Katie

Founded with love by Tyler Tervooren