Credit Cards

Deciding to Keep, Downgrade, or Cancel a Credit Card

cards
Written by Dustin

When it comes to deciding when to keep a card, there are a number of things that go through my head. How do you decide to keep a credit card?

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There are so many different credit cards out there and banks do a great job making us want those cards. They give large sign up bonuses, spending bonus categories, or a list of other possible perks. Many of these credit cards also come with annual fees. Here are some ways between deciding to Keep, Downgrade, or Cancel a Credit Card?

The Sign Up Bonus

This is definitely one of the biggest reasons people sign up for these credit cards. They draw the headlines, pull you, and can make or break if you open a card or not. After you meet your spending requirement and the bonus points have come and gone, this is no longer a benefit to you.

The Spending Categories

This is what we look to after our sign up bonus is long gone. The bare minimum anyone should earn is 2% cash back or 1.5x in Ultimate Reward point or Membership Reward points.

We like to throw in some cards with 5x/5% categories as well. These cards help us increase our point totals faster. Nobody wants a card that earns only 1x/1%.

We always want to earn more. If we can find a card that earns more, we switch.

The Extra Benefits

For some, they want simple benefits and for others they want more upscale benefits. This is definitely a personal preference of benefits you like.

These can range from:

  • Concerige service
  • Price protection
  • Purchase protection
  • No foreign transaction fees
  • Rental car protection
  • Cell phone protection
  • And so many more

I personally like the purchase protections and will even forego extra points on large ticket items. These extra benefits can really add value to your credit card

Partners:

This is where cash back cards and point cards can differ. Cash back is straight forward.

Having a card with transfer partners is great, only if you know how to use them. I feel like I’ve seen too many people open cards have a bunch of points, to only realize they don’t work with their travel goals. Learning about the transfer partners of certain banks can help you get more value from your rewards

I know which partners I like to use and try to learn as much about them as possible. Airlines or hotels I don’t use, I don’t pay as much attention to them.

All of these sections above are great, but probably the single most important feature about deciding whether to keep or cancel a card is the…

Annual Fee

Many travel cards will waive the fee for the first year (you do have exceptions). Think of this as a try before you buy, because you get the nice big sign up bonus, perks, all for “free.”

After your fee-free year is up, you decide if it is worth the money for the “privilege” to hold that card.

There are so many “no-fee”credit cards out there. I even ranked my top ones, but I am more than happy to pay a fee on a card if I find it worth it.

These fees can range from $59 for a card like the Capital One Venture (bad idea), $95 for the Chase Sapphire Preferred, or $450 for American Express Platinum. All of which have their benefits, depending on your goals.

Options for Credit Cards

When it comes time for you to pay your annual fee, you have a few options on how to handle this.

  • Retention Department
  • Keep
  • Downgrade
  • Cancel

Retention Department:

This is usually my first step for any card. It doesn’t matter if I plan to keep or cancel a credit card. The retention offers can be the deciding factor for me when it comes to my credit cards.

There are a few things to keep in mind when it comes to retention offers:

  • What someone else receives, is not necessarily what you’ll receive.
  • When you are told there is no offer for you, that could be true, but try again. Especially once that fee post,they might change their tune.
  • Some banks just are notoriously bad at giving retention offers.
  • Don’t be quick to say you will cancel if you don’t receive a retention offer, they might cancel it for you.
  • Please feel free to leave your tips in the comments when it comes to your approach to retention offers

Being informed on offers people are receiving is a great way to know if you are receiving a great offer or not.

I typically check Flyer Talk for current offers:

My own personal experience:

  • I typically strike out when it comes to Citi offers
  • Most of my American Express cards are no-fee
  • I actually received a retention offer on my Chase Sapphire Preferred a couple years ago, but none since.

The reduction in retention offers could be a couple of things (IMO), I don’t spend enough on the credit cards to trigger a retention offer. The other option is that the economy is improving, so there is no need to offer an incentive.

If you receive a retention offer that you feel is acceptable, then take the offer. If you don’t you can either try again or make a decision to downgrade or cancel the card.

Keeping the Card

When you decide you want to keep the credit card, your first question should be, “Do the benefits of this card, outweigh the fees?” Right after that, you should call for a retention offer. These can yield thousands of points or credit statements to offset the annual fee.

If you decided the benefits outweigh the fee, you pay the fee and keep the card.  If you received points or a credit statement as a retention offer, great! Hopefully you received an offer to offset most or all of the annual fee.

The point at which you feel the benefits exceed the cost, is extremely subjective. Once you hit that point it could be worth looking to downgrade, or cancel

If you value your perks, such as lounge access, you should evaluate the amount of use you have gotten from the card vs had you paid for the lounge access. I enjoy lounge access, but my home airport doesn’t have a lounge and I try to reduce layovers, so for the most part, lounge access is lost on me.

Some of my rules for deciding for this criteria

  • Does my credit card offer me something to keep this card?
    • I have a rule for my hotel credit cards. I will not open one if it doesn’t offer a “free night”
    • Do you receive bonus points for paying the annual fee (like the Southwest credit card)
  • Are the transfer partners ones I use?
    • Before moving to Maine, Southwest and United were my “go-to” airlines. In Maine, I have Delta and American. Ultimate Rewards have become less useful for me.
    • Can I use an airline alliance partner for my points. This is programs like Singapore Airlines for United flights, or Flying Blue for Delta flights
  • Is there a card that can offer me similar earnings for less cost?
    • If you can earn 2% cash back from a card like the Citi Double Cash, then you should really evaluate it if is worth paying $89 a year for the Barclay Arrival or $59 for the Capital One Venture.

I think of these things before moving onto the next part of my thought process. If you feel the benefits of the card are worth more than the cost, keep it.

Downgrade:

If you decided paying the annual fee on your credit card is no longer worth it and you didn’t receive a retention offer (or bad one) this could be the next best option.

The benefits of downgrading your credit card:

  • Keep the history of your credit card. Helps extend the age of your credit
  • Maintain your credit limit
  • Potentially keeping your points alive

Negatives of downgrading:

  • You won’t earn bonus of the card you are downgrading too.
  • This could be sitting in your drawer and never see day light

This could also be strategic as well. Downgrading a credit card can give you access to a card you would have no other way of getting (thanks 5/24 rule).

With American Express, you would still have access to Amex Offers, which can be a great money saver.

**Note: you can’t downgrade a charge card to a credit card or visa versa.**

Cancel:

This is pretty much the last option. If you didn’t receive a retention offer that met your expectations, and you have no interest in downgrading, then cancel.

Before you cancel you want to make sure of a few things. If you have points in your account, you should make sure you don’t lost them if you cancel the card. If they are not, you should look into for a way to keep them around, like moving your points to another card or opening a fee free card. Or if you prefer one particular program, move your points there.

I caution you with the latter, because devaluations happen all the time. Moving points with no plan is never a good idea, in my opinion, so be cautious.

 

Depending on your credit limits, this could change your credit utilization, which can have a negative impact on your credit. Hopefully, if you are playing this game, your utilization is at 0%.

You can potentially move your credit limit to another card of the same bank. It is worth asking since this will keep the amount of credit you have the same.

Conclusion

These are pretty much the steps I go through with each and every one of my cards. Once you move beyond the “Wow” factors and the hype from everyone, it comes down to is the card worth it for you.

Once you start looking at the cost of the card as “cost vs benefit,” it really starts to make it easier if you should keep a card.

What are the steps you go through when deciding to keep a card?

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About the author

Dustin

After completing 6 years of pharmacy school, I finally had the time to travel. I started investigating ways to travel for less and when I redeemed my first award flight for my honeymoon, I knew I was hooked! Fast forward a couple of years and places I had never dreamed of visiting like Budapest, Honolulu, Bermuda and many other places where all within my reach, and for little to no money out of my pocket. Now, I have collected well over a million points and miles, and try to help people travel for less on their wallet.

2 Comments

  • I downgraded my Citi Premiere to a Citi Thank You Preferred. I’m wondering how this product change is treated by Citi as far as the 24 month rule of opening and closing accounts. Does this downgrade prevent me from applying for another Citi card for 24 months?

    • Hey Larry!

      I spoke to a Citi CSR that says downgrading your card WILL NOT reset the clock in order to earn another bonus.

      Based on what they told me, it shouldn’t prevent you from getting the bonus in 24 months from initially opening your TYP.

      Hope that helps! Thanks for reading, I appreciate it!

      Dustin

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