4 reasons to close a rewards card
Ask a question.
Dear Cashing In,
I got a Barclaycard Arrival Plus card almost a year ago, mostly because of the points it came with. The annual fee is coming due next month. Should I cancel it? – Kathleen
To get the most out of your rewards cards, it helps to pay close attention to the details. Hats off to you for recognizing that your card anniversary is coming up, and with it that $89 annual fee.
It’s easy to understand why people sign up for rewards credit cards. Many do it for the big sign-up bonus. Typically, you sign up for a card, then have to spend a few thousand dollars in a few months to qualify for tens of thousands of points. In the case of the Barclaycard Arrival Plus, you earn 50,000 points after spending $3,000 in the first 90 days.* Those points are worth $500.
But what can be tougher to figure out is when to ditch the card. Here are four good reasons for closing your reward card account:
1. The annual fee is
Some rewards cards, including your Barclaycard Arrival Plus, waive the annual fee for the first year. But on the first anniversary of having the card, they charge the fee. If you have the fee approaching, that should prompt you to re-evaluate whether you still want to keep the card. Even if the annual fee is appearing on your current statement, you can call and cancel the card and the bank will typically refund the full annual fee if you are close to the anniversary date.
2. You’re not using the
Sometimes, after wringing the rewards from the sign-up bonus, you find that you no longer use the card or its perks. Sometimes, though, you continue to use the rewards card, especially if it gives you bonuses in certain spending categories. Or perhaps the rewards card comes with a perk that you use, such as free checked bags on an airline card or room upgrades on a hotel card. But if you find the card is not doing anything for you, and it carries an annual fee, canceling could be in your best interest.
3. You don’t like
having too many cards.
Juggling more than a couple of rewards cards can be a hassle. It is easy to forget when they are due and what the features of each one are. Consider compiling a spreadsheet to keep track of all the relevant data. But if you are uncomfortable keeping up with multiple cards, it can make sense to eliminate the card you use the least.
4. You are carrying a
Rewards cards really only make sense if you pay them off each month in full. Rewards cards tend to have high interest rates. If you carry a balance, interest charges likely exceed what you are earning in rewards. A better move might be to open a new card with a low interest rate, transfer the balance there and then cancel the rewards card. You might pay a balance transfer fee on the new card, but could still wind up in better shape than carrying a balance for months on a high-interest card.
Before closing a card, make sure you understand what that move will mean for your credit. Also, make sure that any rewards you have accumulated won’t disappear along with your account. Usually, rewards accumulated with airline and hotel cards will remain in those loyalty programs, but points on bank-run rewards programs will disappear. Make sure you spend them first.
If you don’t have a compelling reason to close a card, it’s OK to leave it open. There can be some slight benefits to your credit rating for doing that. But if you’re paying and not using the card, it can make sense to shut it down.
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Is it worth it to transfer Hilton hotel points to American Airlines? – If you want to transfer hotel points to an airline to get a free flight, check the transfer ratio first to make sure you're not losing value ...
- Which credit cards should I carry in my wallet? – If you have a stack of credit cards and are trying to decide which ones to keep in your wallet, here are some ways to decide which to keep and which to stash ...
- With Citi Costco card, which gas stations earn 4 percent cash back? – You can earn rewards most places you fill up, with a few exceptions ...