Friday, July 27, 2012

Why/When do I close credit cards?

Why do I want to close credit cards?

1.      First and foremost, if you have ANY no fee card, DO NOT close it. It will hurt your credit and it doesn’t cost you anything to keep it, lock the card in your draw FOREVER if you don't use it.

2.      Annual fee, and you don’t want to pay the annual fee(who does?!). There are some cards that I’d like to pay the annual fee such as Chase Priority Club VISA card (make sure you apply the 80k offer one from FlyerTalkthread) for $49 you get one night free each year, not bad.

3.      For no fee cards, I don’t see the reason you will need to cancel it, if you do, I’d say hold it at least 6 months, don’t give creditors an impression that you got the sign-in bonus and you canceled it right away, if they were to “blacklist” you, you are screwed. (particularly for Chase)

4.      Some banks don’t want to offer you another card unless you close an existing card if you have too many of their cards. In this case, you have to choose which card to cancel.

When do I close card?

1.      Preparation starts at “T-2”, what I mean by that is T=2nd year annual fee starting month. Say, Feb 2013 is the month the annual fee will kick in, I’d like you to get prepared by Dec 2012.

2.      If you haven’t used this card for a while, make a few transactions, it’s Important and I will cover why in the retention offer later.

3.      You call the number on the back of your credit card and tell the rep you want to close the account. You will be diverted to a retention department where their job is to keep you as possible as they could.

4.      You explain to the rep that you like this card but dislike the annual fee. Since you have a few transactions in step2, the rep you are talking to will offer you a better retention offer, say, they will offer: if you use the card for the next 5months, instead of getting 1x point/mile per dollar, what about 5x?

5.      The offer varies from person to person for obvious reason, big spender, better offer, for reference, take a look at others’ offers at Chase, Citi, for other banks, search the forum

6.      Keep in mind, the above offers are for your reference only. You can either decline or accept, at this point, I always accept their “best” offer as I have 2 months to make my decision, and that comes to next step: double dipping retention offer.

7.      Say, you accept whatever offer they gave you, good! At “T-1”, one month prior to the annual fee, call them again. Now, this time, you are not “bluffing”, okay? You have to make a decision whether or not to keep the card.

8.      You will most likely be offered another round of retention offer(if you are not being offered,  politely hand-up and call again), that’s why I called it double dipping, say, they offer you this time, 3000 points/miles to offset partial of your annual fee(this is what they called).

9.      Do you want to take it? GREAT, go to step 10. You don’t want to? Fine, you stop here and close the card.
I recommend TAKE IT, because now I am telling you this is the fun part starts, “pre-rated fee refund”.

10.   You can call back T+1, one month after you actual paid the fee(say $120), this time, you know that you are for SURE to cancel this card, and it’s very rare they offer you another retention offer. You canceled the card and since the annual fee normally pre-rated, you will get $110 back. (make sure you confirm with your bank that the fee is pre-rate-able prior to paying the 2nd year fee )

11.   In a nutshell, it cost you $10, and you get 3000 points/miles and 5x for 2 months spending. Not bad at all! you did max out the benefits of this card.


  1. Thanks for the great post.

    Any specific advice of the amount of miles or hotel points to aim for depending on which credit card is coming up for annual fee (SPG, Hyatt, Chase United, Citi AA...) based on your own and others' experience?

    1. you can refer the above Flyertalk threads for Citi/Chase. my personal experience is if you are not a big spender, like me, 1st offer will be 3x points for next 3months and 5000 points cap and next offer will be 3000 points/miles. Again, it's really YMMV.