What to Do With a Credit Card After Earning the Welcome Bonus: Keep, Downgrade, or Cancel?
Editorial Disclosure – Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post..
If you’re new to points and miles, you may wonder what to do with a credit card after earning the welcome bonus. Should you keep it, downgrade it, or cancel it?
Here’s a simple guide to help you make the best decision for your travel goals and finances.
Important Note on Points: Before making any decisions about keeping or closing the card, I want to make sure you can transfer or combine your points into another account you’ll be keeping open should you decide to close a card.
Confirm if that’s possible with the representative and have them walk you through the process? I want to avoid losing any of your hard-earned rewards.
Action Steps Before Cancelling a Card
Before you rush to cancel a card, there are key steps to take to maximize its value and avoid negative impacts on your credit score.
1. Check for a Retention Offer
A retention offer is a perk banks provide to incentivize you to keep your card. This can include:
- A points bonus after meeting a spending requirement within a specific time frame (similar to a welcome bonus).
- Waiving or reducing the annual fee.
How to Request a Retention Offer:
- American Express: Use their secure chat feature.
- Other Banks: Send a secure message (like an email) through your online account or call their customer service directly.
Pro Tip: Banks may not always offer retention perks, but it’s worth asking. A quick call or message could save you money or earn you additional points.
A sample script to give you an idea of what you might say when you call.
Hi, my name is [Your Name], I’ve really enjoyed using [Card Name] for [specific benefits you like, e.g., earning rewards, travel perks, etc.].
Reason for Call:
However, as I’m reviewing my budget and the annual fee, I’m considering closing my account.
(If They Need Clarification):
I’d love to continue using this card, but I’m weighing its value against other options. A retention offer could really help me make that decision.
Closing:
Thank you so much for taking the time to look into this for me. I really appreciate your help!
When to Keep an Annual Fee Card
It’s often worth keeping an annual fee card if you find continued value in its benefits. Here are some reasons to hold onto the card:
1. Annual Free Night Certificate
Many hotel credit cards provide a free night annually, which can easily outweigh the card’s annual fee.
2. Access to Transfer Partners
Some cards allow you to transfer points to airlines or hotels, opening up premium travel opportunities.
3. Airport Lounge Access
Premium cards often include lounge access, which can enhance your travel experience with complimentary food, drinks, and relaxation.
4. Travel Insurance and Coverage
Perks like rental car insurance, lost luggage protection, and trip cancellation coverage can save you money and provide peace of mind.
Pro Tip: If the card isn’t your oldest line of credit, keeping it can also help maintain your credit score by preserving your credit history.
When to Downgrade an Annual Fee Card
If the annual fee is no longer worth it but you want to keep your credit line open, consider downgrading to a no-annual-fee version of the card.
Benefits of Downgrading:
- You retain your credit history with the card.
- You stay eligible for a future welcome bonus on the premium version of the card (if the issuer allows it after a specific time frame).
Example: If you aren’t using premium benefits like lounge access or transfer partners, a downgraded version of the card may still be a useful tool for everyday spending.
When to Cancel a Card
Closing a card should be your last option, but sometimes it’s necessary. Here are two scenarios when cancellation makes sense:
1. The Card Has No Continued Value
If you can’t justify the annual fee and there’s no option to downgrade to a no-fee card, cancellation may be the best choice.
2. To Be Eligible for a Welcome Bonus Again
Certain cards, like Southwest credit cards, require you to close your current card before reapplying to earn another welcome bonus.
Pro Tip: Before canceling, ensure you’ve redeemed all your points or transferred them to a partner. Points tied to the card may be forfeited once the account is closed.
Final Tips for Managing Your Credit Cards
- Keep Track of Annual Fees: Set reminders so you can evaluate a card before the fee posts.
- Evaluate the Card Annually: Ask yourself if you’ve used the card’s benefits enough to justify the fee.
- Be Strategic: Retention offers, downgrades, and cancellations should align with your long-term points and miles goals.
Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
I found out about points and miles accidentally.
I was researching index funds and happened upon the points and miles community through creators who also post about budgets, financial independence, and investing.
Points and miles allowed those people to travel and work toward financial independence simultaneously.
Thank goodness I got started when I did. The past almost two years of travel have been something we will never forget.
Earning points and miles through credit cards is only a good choice if you have the financial discipline to use them, like cash/debit cards.
Since we started traveling with points and miles, we have had more money going into our investment and savings accounts than ever.
Now I'm excited to teach you!
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