to cancel, or not to cancel?

Posted by Noob Master on Dec 22, 2011 in Uncategorized | 0 comments

So I’ve been getting a lot of emails recently from readers who want to know the appropriate time to cancel a card. Since credit cards are the best way to rack up some miles, this is worth chatting about.

There is a misconception out there that it is a GOOD idea to cancel your card as soon as you collect your miles. False. In fact it is a terrible idea, because:

• It shortens your credit history
• Could get you blacklisted by the banks. Meaning that they won’t approve you next time, costing you miles and wasting a hard hit on your credit.
• You lose your card as a bargaining chip i.e. during the reconsideration phone call.
• You miss out on any retention bonus. I have received numerous retention bonuses that have made it a no-brainer to keep the card. At least until the next year.
• Lowers your credit limit. Yes, this is bad unless you are replacing your cancelled line of credit with new credit. You want your credit limit to stay the same so that your credit utilization remains good. Your credit utilization is your debt to credit ratio. You don’t want what you owe to be over the 20% mark.

I hate paying an annual fee on a card and I don’t suggest it, but there are rare occasions that this makes sense. My Priority Club card gives me a free certificate every year and the annual fee is only $49. Boom! It costs me only $49 to stay at an Intercontinental property. That’s a sick deal. If your card’s perks don’t justify the fee, then at some point you will have to make the retention bonus call. If it is a Chase card hold on to it, you might need it during the reconsideration.

To sum all this up- Don’t be impulsive when canceling  your cards. If you are, you can end up hurting your credit and wasting opportunities to earn some sweet miles and points.

Learn to love it.

— Noob Master