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Nov
Prompted by my weekend post, “Confessions of a Once and Future Credit Card Churner,” I’ve had several questions about signing up for credit cards to get the bonuses.
Over the years I’ve had many many credit cards and many many bonuses. In a little while I’ll offer a simple illustration of how you can go from zero to sixty in very short order, putting bonuses to use quickly for real aspirational travel and without going over the top the way that I and many others have done.
But in the meantime I’ll answer a reader question that’s come up a lot this week: When do I cancel cards?
This first rather assumes that I got the card for the signup bonus only. There are three types of credit cards I’ve got:
- Cards that I put spending on. These are Chase Sapphire Preferred Visa for restaurants, non-air travel including cabs even, international spending, and merchants who don’t take American Express; American Express Premier Rewards Gold for airfare (triple points) and gas and groceries (double points); and the Starwood Preferred Guest American Express for the rest of my spend.
- Cards that I get for the benefits. I have the cards, might as well stick ‘em in a drawer as far as putting spend on them goes, I have them for other reasons — American Express Platinum for the broad lounge access, Alaska Airlines Visa for the companion ticket.
- Cards that I get for the signup bonus. Those are the ones that I may want to cancel, because once I’ve gotten the bonus I’ve generated the value I was after and don’t want to pay more in fees without similar bonuses going forward.
I keep, of course, the cards that give me benefits and the cards that provide continued valuable rewards for putting spending on. But what about the ones I signed up for to get the bonuses? The ones I’m “churning”…?
- I keep no-fee cards. I can always cancel later – I can horse-trade with an issuer, giving up the no fee card for a new card with a new bonus if that issuer doesn’t want to give me another card. Or I can cancel if someone else thinks I Have too much available credit, though I’ve never actually run into that situation. Overall having more available, unused credit is good for my credit score, it pushes down my ‘utilization percentage’ (the percentage of total available credit that I’m using at any given time, viewed in some measure as ‘how responsible am I being with credit?’)
- I keep my oldest cards. This is also good for my credit score, it pushes up the average account age.
- I don’t cancel right away. Now, there are urban legends and strict wording of some cards’ terms and conditions about bonus points being taken back by some issuers if you cancel too soon, in the first four or six months. I’ve never actually seen this, I’ve heard some unverified stories of it happening. But you don’t usually need to cancel to quickly anyway. And no, bonus miles don’t get taken from you when you cancel after a year despite what some customer service reps may tell you.
- I cancel before the annual fee hits. I love fee waived the first year cards, I’ll even sign up for some cards that do come with an annual fee, but I don’t want to pay that fee a second time unless they’re offering me significant benefits in exchange for the fee. So I’m going to wait more than 6 months, usually 10 or so, and then call to cancel annual fee cards that I got strictly for the bonus.
- But I might not actually cancel, even then.. I may be offered a retention bonus to keep the card. When I called to cancel the American Airlines card I signed up for in 2009, they asked me why I was leaving? I said I didn’t want to pay the $85 fee. They offered me an $85 statement credit after I used the card 5 times. I made 5 charges, they credited me $85. So my charges were free. And then I called back to cancel the card. (Yes, that was simply a ‘free’ $85.)
How to keep track of and organize these cards? Well I just flip through them, looking at the expiration month on the card itself. I’m not nearly as organized as some…
Responding to my post about the best mix of rewards cards for my own wallet, commenter Acker wrote what may be one of the best responses to a blog post I’ve ever seen:
I thought about simplifying but love this game. I have so many darn cards – active and not. With the exception of the cards I’m working at any given time, I keep them semi-organized in a small zip lock (actually it’s a quart-sized bag).I use a black sharpie and write right on the cards “2x gas” “50k w/ 10k spend” “cancel 1/2012″ etc. I can only imagine what waiters and clerks think, but who cares?
When I cancel a card, I write a cancel sign on the front of the card with the date cancelled. I even thought of making a Chicago Do Halloween costume out of the 50+ cards. I won’t even guess how many elite hotel/airline cards I have. Why I keep the old cards, I don’t know.
Oh, I have a zip lock for my husband’s cards too. He has no interest in churning, so I do it for him. Of course I’m on top of our credit scores. He digs the perks and is game to switching cards whenever I need him to.
I’ve got about 12 Amex cards (maybe more?) waiting for Small Business Saturday. Do most of us churn for our spouses while churning for ourselves? It does get a bit complicated though, no?
(Line breaks added)
oleg said,
Other useful tidbit you don’t mention, is most banks are happy to convert your fee card to one without an annual fee. That way you still get the benefits of the extra open line without the reason you want to cancel.
ArizonaGuy said,
A couple months ago I bought some plastic sleeves used for holding baseball cards and a 3 ring binder. They’re still not organized by any real method other than I have dividers between my cards, my wife’s cards, the small handful of cards I’ve managed for my mom, my collection of loyalty cards I’ll never use and a sheet full of casino club cards. Works well enough for me.
I have a sticky note on my desktop reminding me when the annual fee is due on various cards so I remember to call at 10 or 11 months.
I basically do this the same way you do. Amex Premier Rewards Gold, SPG Amex, Chase Sapphire and Capital One are my main cards. I flip flop on the Amex cards when all things are equal. Chase Sapphire is for dining and travel expenses, Capital One is for all other categories and where Amex isn’t an accepted.
I keep Alaska visa for the companion pass, US Airways card for their less lucrative but still useful companion pass plus the 5000 mile discount on US metal – makes their random weekend getaway specials from hubs only 10K round trip, can’t complain about that.
Then there’s the very old cards. That’s mainly a no-fee Amazon visa that I used exclusively on Amazon until the BA transfer option went away this year. Sits in the plastic sleeve now.
LaOhanaMike said,
I just keep a simple draft email..with each card..when i sign up and the bonus..i also will write when i cancel….although i’m just starting this credit card thing this year.
Radio said,
I have been thinking about this a lot recently so I am happy to see your post. I know you usually post upcoming promotions, but any tips on when to sign up for certain credit cards? As in, are there times of the year where the bonuses tend to be better than others? Thanks!
Nick said,
Anyone have any tips on checking credit scores? I haven’t jumped into applying for any bonuses because I don’t want to hurt my score. I use Credit Sesame and Credit Karma, and both have me over 760. Should I use a paid service or just use the two services I do and take the plunge?
Jacob said,
Gary, I love your blog and it’s saved me quite a bit of time and money. But since you’ve posted in the past about some of the ethical quandaries of this business, I thought I’d point out one thing that stood out to me.
Your example “And then I called back to cancel the card. (Yes, that was simply a ‘free’ $85.)” seems out of line. I get that you fulfilled your end of the bargain under a very strict reading (make 5 charges, get $85 credit). But the very clear implicit understanding was that they were crediting you $85 because of the upcoming $85 annual fee. The idea was to waive the annual fee, they just implemented it as a statement credit followed by a charge. By canceling before the charge but after the credit, it’s a bit like noticing a bank error in your favor and then going out and spending the money and closing your account.
While I’m not a big fan of TBTF universal banks, as they’re not above the same level of charade when it comes to customers (debit charge sequencing and overdraft fees come to mind), I think this crossed an invisible line. I’ve always found it a bit tough to parse the gray area of taking advantage of certain offers (e.g. was it ok to buy lots of dollar coins to spend on big-ticket transactions that would quickly end up in a bank, but not deposit at the bank yourself?). However, this one feels a bit clearer.
Just my two cents!
Jacob said,
Finally, I bring it up if only because since it clearly compromises the intent of the retention offer, this kind of practice could discourage banks from continuing to offer such generous terms in the future.
thrashsoundly said,
I understand the value of the SP and PRG cards with flexible points. I’m just curious what you’d deem as sufficient spend on these cards to make the annual fee ($95 and $175 respectively) worth paying every year? I guess in another way, what cent value do you put on these points? Thanks.
Radio said,
Nick,
You could try Zendough. They report your credit scores directly from the 3 credit bureaus as well as outline any items with a negative impact on your credit. They offer a 7 day free trial if you aren’t looking to spend.
thrashsoundly said,
Nick,
It’s best to find out what bureau is pulled by the bank’s card application in your area. If it is Transunion, you’re set. If not you’ll want a way to check the other bureaus.
Peter S said,
Zendough only give you Vantage score. It does not give you FICO score. They only you one vantage score for free then you must subscribe for at least one month to get the other two.
Nick said,
@Radio, Thrashsoundly and Peter S-
Thanks for that info. I’ll make sure I check creditboards for who is pulling and I’ll look into Zendough. I suppose I could go through the free 7-day trial places as I apply for or cancel cards.
toomanybooks said,
I do what Acker does with notating directly on the card, but I use a cut-down Post-it note, since offers/terms change. Makes changes easier for me.
Another tip I might offer is not to COMPLETELY stop using any of your cards. Even if the rewards are inferior, put $20-30 on every couple months. A tank of gas or dinner out occasionally.
CC companies have been known to summarily cancel cards that are not used for substantial periods of time.
My Credit Card Spending Strategy for 2012 - View from the Wing said,
[...] Cards you get just for the signup bonus. You want to put your minimum spending necessary on the card to get the bonus, and then stop. Don’t cancel the card right away, keep it until your first year is almost up and then you may be eligible for a fee waiver or a retention bonus that’s worth paying the fee. Or you’ll want to keep the card in order to horse trade for another one, it’s easier to give up credit in trade for a different card than it is to cancel first, then apply for a card and hope the card company will give you back the credit. Here’s my longer discussion of when to cancel your credit cards, and when to hang onto them. [...]
Miles said,
Nick, if I recall correctly, the Frugal Travel Guy said something like this at the 2010 Chicago Seminars: “If you FICO is above 720, you aren’t applying for enough credit cards.”
Unless you plan to apply for a job or a mortgage in the next couple of years, you need to be using that FICO asset you have and converting it into miles and points assets. And, after you get some cards, pay them in full every month, and your total available credit line goes up, your FICO will be even higher than before.
Reader Question: Signup for Continental Mastercard or Chase Sapphire Preferred? - View from the Wing said,
[...] I don’t like cancelling Chase cards, I like holding onto them and trading them in for new cards, it makes approvals that much easier. Here’s my longer discussion of what cards to cancel and when. [...]
Reader Questions about Rewards Credit Cards - View from the Wing said,
[...] Back in November I wrote a fairly detailed explanation of what cards to cancel and when. [...]
When Do You Cancel Cards You’ve Gotten Just for the Signup Bonus? - View from the Wing said,
[...] written extensively on what credit cards to cancel and when as part of a churning strategy, using credit card signup bonuses for fun and [...]
It’s Closing Time… « Points Unseen said,
[...] then cancel. That said, there’s more to it than that. Gary @ View from the Wing describes some of the other considerations and I’d encourage reading that before closing cards (or, frankly, before opening them). I [...]
Tyler said,
I keep track of all the cards in my house. Between the cards I apply for and the ones I apply for in my wife’s name. It can be quite a hassle. So what I do is I bought some of the old nine holder sleeves that I used to put baseball cards in as a kid. I have a little book of cards so to speak that helps me keep track. I think it works pretty well. I also keep all my loyalty cards, gift cards, and random things like United Club passes in there.
Duane said,
Does anyone have a spreadsheet program designed for keeping track of cards?
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