When canceling a rewards card, purge clutter, but not points

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

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Question Dear Cashing In,
I've had a Chase Southwest Rapid Rewards credit card since 2012. I very rarely use it and with the annual fee, it doesn't seem worth it. I've got maybe one flight's worth of rewards saved up and a decent credit limit. Should I close this account or not? I don't mind having the extra card, but this particular one seems like a waste of money for me. Could I maybe close this and then open another immediately? Thanks -- Kevin

Answer Dear Kevin,
Around March of every year, you'll notice magazine, newspaper and online publication headlines offering advice on spring cleaning. It's helpful to look around your house periodically and remove the clutter that somehow accumulates.

Though it's not spring now, the same principle applies to your credit cards. If you fail to purge the ones that clutter your financial life, you'll be left with cards that do you no good. This is especially true of rewards credit cards, which typically come with annual fees. 

If you're not using a card and see no benefit from it, by all means cancel it. With some rewards cards, you might not charge items but receive some other benefit that's worth the annual fee. For instance, if you have an airline card that allows you to check a bag for free and board early, it may be worth keeping even if you only use the card to buy tickets on the affiliated airline. 

However, in the case of the Chase Southwest Airlines Rapid Rewards cards (annual fee for Plus card, $69/year; Premier card, $99/year), there are no such perks. Checked bags are already free, and the airline does not assign seats but rather boards travelers by the order in which they check in. So in your case, it's probably not worth keeping.

Before canceling, you'll want to make sure that you don't lose any reward points you have accumulated. With airline and hotel cards, that is not usually an issue, because the miles or points you accumulate with a card go into the airline's or hotel's reward account. But it can be an issue with cards tied into a rewards program run by a card issuer, such as Chase Ultimate Rewards, American Express Membership Rewards and Capital One miles. With those, if you cancel a card, you lose the points or miles unless you have another card linked to the program. 

Also, be aware that when you call to cancel, Chase might offer you incentives to keep the account open. Or the Chase representative might try to persuade you to apply for a new card. You might do a little research ahead of time to see if there are other cards from Chase or another issuer that meet your needs better than the Southwest Airlines card. You might look at other airline cards, more flexible travel rewards cards or even cash-back cards.

By canceling a card, your credit score will probably drop by a few points, because you suddenly have less credit available to you. But your score should recover in a matter of months and the drop should not be so bad that it will hurt your chances of being approved for a new card, even if you apply immediately.

Kevin, take the plunge, cancel the card, and find one that better suits your needs. A seldom-used card just takes up space and racks up fees that cut into any rewards you might earn.

See related: How to cancel a credit card without hurting your score, Sign up, max out, cancel, repeat: Rewarding, but dangerous to credit?

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Updated: 12-13-2018