4 reasons to close a rewards card

Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

Ask a question.

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

Answer Dear 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 coming due.
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 card.
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 balance.
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.

*The content on this page is accurate as of the posting date. Please see the bank’s website for the most current version of the offer.

See related: 5 questions to ask before making a big purchase for rewards, 5 questions to ask before applying for a rewards card 

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.





Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


Updated: 11-25-2017