Should I cancel or downgrade my credit card?

At a glance#

The difference in one sentence#

A product change swaps the product and keeps the account. Closing ends both.

Almost everything else follows from that distinction, because points, account age and credit line hang on the account, not on the product. Dropping the annual fee is therefore rarely a reason to close. Moving to a product without a fee reaches the same goal without the side effects, and closing is right only when no suitable product exists or the relationship with the issuer should end for other reasons.

The question usually arrives at the end of the first card year. The bonus has posted, the second annual fee is due, and the card has served its purpose. Both routes lead away from the fee, but they leave different amounts behind.

Account age and credit line count in systems that track account history, and a closure shows there for years. How much it weighs depends on how many other accounts exist. With several older accounts one closure barely registers; with few it can move the picture noticeably.

What happens in a change#

The product, the benefits and the card number change; the account, the points and the history stay.

The account survives#

The account number usually stays, while the card number frequently changes. The account carries its history forward, which is what matters in systems tracking account history: an old account looks good there, and a change preserves that age, as does applying for a credit card hurt your score describes for the application side.

The credit line usually survives, though it is sometimes adjusted when the new product uses a different range. Most issuers take the request by phone or through the online account. Processing takes a few days, and the old card stays usable in the meantime. For the cardholder the new number is often the only visible sign of the change, while statements and payment history carry on.

The points stay#

Bank points hang on the account. As long as the account exists, so do the points, whichever product runs on it, and a balance that would lapse on closure survives a product change. That is the largest practical advantage of the change.

Closing anyway means transferring or redeeming first. The order and the deadlines sit in points after closing a card. Points already transferred into an airline programme sit there and are unaffected either way.

Some issuers treat a change as a new account. A new account then appears, and the same consequences as a closure follow.

The benefits change#

Insurance, lounge access and credits follow the new product from the moment of the change. Insurance ends with the product, so a trip already covered by the old card needs checking before the change, to see whether that cover survives. The safest moment for a change lies between trips.

Earning rates change too. A product without a fee usually returns less, and that belongs in the decision.

With several cards from one issuer the shared points account matters as well. Balances frequently pool, and then one remaining card is enough to keep the balance, as how transferable points work describes.

Worked example: one card, two routes#

A card with an annual fee no longer pays for itself. The options are a change to a product without a fee and a closure.

In most cases the change is the better route. Read line by line, it wins or draws on every row: the fee disappears on both routes, the effort is comparable, and only the closure costs something that cannot be bought back, the history of the account.

The points settle many cases on their own, because a sizeable balance is worth more than any convenience in processing. Closing after the first year and losing a grown balance regularly gives up more than the annual fee would ever have cost, and the loss only becomes visible at the next planned redemption. A change would have had the same effect on the fee and left the balance intact.

The effort hardly differs. Charges have to be re-pointed either way, so closing saves no work.

Upgrading again later is usually possible, though without a bonus; the bonus would need a new application, which is only possible after any lockout period. Many issuers also require a minimum holding period before a change, and until it has passed only keeping the card remains.

Status goals add one more point. Some cards deliver qualifying credit or status boosts, and those end with the product, even though the account carries on.

When closing is right#

Closing is the better step in a few situations, and in each of them the account has little left to preserve that a change would save.

No suitable product. Where the issuer has no card without a fee, or refuses the change, only closing or continuing to pay remain.

No balance, no history. Somebody with neither points nor meaningful account age loses little by closing. On cards without a points programme only the account age and the credit line are at stake, and both weigh less than a large balance.

The end of the relationship. Leaving an issuer for other reasons calls for a closure; a change would be half a step.

A planned bonus. Where a programme requires giving up the product before the same bonus can be earned again, closing is part of the plan.

Even then the points come first. A closure that is right in principle still goes wrong if the balance is sitting on the account when the call is made.

When it is not worth doing either#

The exercise is not worth starting in these situations:

• When the card pays for itself. As long as the benefits used exceed the fee there is no reason.
• Shortly before a financing. Changes to accounts are badly timed then.
• When a retention offer appears. Some issuers respond to an intention to close with a credit.
• When the effort exceeds the fee. With small amounts, re-pointing standing charges costs more time than the money is worth.
• With supplementary cards still open. Several cards on one account need checking before anything changes, and anybody holding one should hear about it first, because their card is replaced or withdrawn too.

Financing deserves the most caution. A loan application looks at the same file that a closure changes, and any change to an account in the weeks before it only raises questions.

A retention offer is no argument for another year in itself. It shifts the calculation, and the same question returns next year. Some issuers instead offer to waive the fee against a minimum spend, which can move the decision by a year.

Asking for a product without a fee in a matter-of-fact tone usually produces a matter-of-fact answer, and sometimes an offer that settles the decision anyway.

The right moment#

The annual fee sets the date, and the decision belongs before it posts. Waiting rarely makes it easier, because each month closer to the fee date leaves less room for a refused change, a minimum holding period or a slow points transfer. Afterwards many issuers allow a short window for a pro rata refund. It is tight and sits in the terms, and outside it the fee is gone.

The look at the fee belongs on the table once a year anyway, and how annual fee maths works shows how to run it. Writing the fee date of every card into one calendar means the question arrives on time each year, not as a surprise on a statement.

Cards that are barely used carry a risk of their own. An account without activity is sometimes closed by the issuer, and then the bank decides, not the customer.

With two cards from one issuer, check which is older before acting. In case of doubt the older account survives, because it carries the longer history.

What to settle first#

Three steps prevent the usual side effects.

First secure the points. Transfer or redeem before anything changes on the account.

Second re-point the charges. Subscriptions and standing orders hang on the card number, and that changes in a product change as well. The last statement shows most of them, since every recurring line is a payment that will fail on the new number. Cards that carry recurring travel bookings need particular care, because airlines and hotels hold the old number for future stays, and those charges fail quietly weeks after the change.

Third check trips in progress. A trip covered by the card’s insurance should be over before the card changes.

A few loose ends are easy to forget. A credit balance is paid out on closure but frequently takes weeks. Open disputes are not ended by closing an account, though their handling gets more awkward. And wanting the same card again later means checking the lockout period first, because it frequently starts with the closure, not the opening.

Doing it by phone means noting the date, the time and the name of the agent. Those three details settle any later query in one sentence.

The account is an asset with a history, and the product only the wrapper around it. Seen that way the decision takes two minutes and is rarely regretted; a call made out of annoyance regularly costs more than the fee. The sequence is the same at every issuer, and only the deadlines and product names differ.

The most common mistakes#

• Closing when a change is available. A product without a fee is worth asking for first.
• Leaving points in the account. Transferring or redeeming beforehand keeps them safe.
• Deciding after the fee posts. The date belongs in the calendar before the posting.
• Forgetting standing charges. A list of recurring payments drawn up before acting saves failed bookings later.
• Overlooking insurance cover. Trips in progress should be finished before the card changes.
• Hoping for a new bonus. A change does not count as a new account, so no bonus follows.

Related topics#

• How do I calculate an annual fee?
• Points after closing a card
• Does applying for a credit card hurt your score
• What a welcome bonus is worth
• What card travel insurance covers
• How do transferable points work?