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…
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)