When to Cancel a Credit Card and Alternative Options

One of the most frequently asked questions we get is, “should I cancel my credit card?” The answer: it depends. If the card doesn’t have an annual fee, I generally recommend keeping it since there’s no cost associated, and it keeps your credit history alive.

Depending on the credit journey stage you’re in, it might not be beneficial to cancel a credit card. Let’s walk through a few scenarios.

Thin Credit File / Early Game

Does canceling a credit card hurt your credit score? Canceling a credit card will impact the average age of accounts and number of accounts.

If you are starting in your credit journey with less than two years of credit history, I recommend keeping the card until you replace it with a new one.

What should you do with credit cards that have an annual fee?

There are a few options. If the card…

a) Has an annual fee and there’s a no-fee downgrade path
    = downgrade the card and keep

b) Has annual fee without a free downgrade path
   = build out a base for your credit (3/4/5 cards) and then cancel the card

c) Has no annual fee = keep

Mid-Game

When you have a strong foundation of 3-5 credit cards and at least two years of credit history, canceling a card has less of an impact.

Should you cancel or product change the credit card?

There are a few options. If the card…

a) Has an annual fee and there’s a no-fee downgrade path
    = downgrade the card and keep

b) Has annual fee without a free downgrade path
   = cancel the card if you get negative expected value

c) Has no annual fee = keep

The mid-game is interesting because certain credit issuers like American Express limit you to only 5-6 credit cards at a time. If you want to add another Amex card, you’ll have to cancel one to make room.

You’ll have to decide which cards you’ll want to keep as a foundation, and which ones you don’t mind canceling.

End Game

For those with 5+ years of credit history, I recommend keeping your oldest cards since they are the foundation for your credit. Canceling one of your oldest cards can have a hard impact on the average age of accounts. Canceling newer cards will have little or no impact.

Should you cancel or product change the credit card?

There are a few options. If the card…

a) Has an annual fee and there’s a no-fee downgrade path
    = downgrade the card and keep OR do what you want

b) Has annual fee without a free downgrade path
   = cancel the card if you get negative expected value OR do what you want

c) Has no annual fee = keep OR do what you want

When there’s a solid foundation for your credit history, you can choose any path, and it will have little impact on your credit score.

Alternative Option to Canceling a Credit Card: Product Changing Credit Cards

If the credit card you want to cancel is more than 12 months old, I recommend looking into product changing the card to a no annual fee card (when possible). Product changing the card will keep your credit history alive, and the account numbers stay the same.

Chase Product Change Options

For example, if you have a Chase credit card and want to product change, there are a few options. Keep in mind that you can only product change within the same family of cards.

The following Chase cards have a no annual fee product change options.

Chase cards with downgrade paths:

• Chase Sapphire Preferred
• Chase Sapphire Reserve
• United Explorer
• United Club
• Disney Premier

Chase cards with no annual fee:

• Ultimate Rewards cards:
• Chase Freedom
• Chase Freedom Unlimited
• Disney

American Express Product Change Options

American Express charge cards do not have any no annual fee product change options. Charge cards cannot be product changed to credit cards. You’ll have to either keep the card, product change to a lower annual fee option, or cancel the card.

Similar to Chase, you can only product change within the same family of cards. Delta cards can only be changed to Delta, and not Hilton or the EveryDay card.

American Express credit cards with downgrade paths:

• Amex EveryDay Preferred Credit Card
• Blue Cash Preferred Card
• Hilton Honors American Express Surpass Card
• Hilton Honors American Express Aspire Card
• Delta SkyMiles Gold American Express Card
• Delta SkyMiles Platinum American Express Card
• Delta SkyMiles Reserve American Express Card

American Express credit cards with no annual fee:

• Amex EveryDay Credit Card
• Blue Cash Everyday Card
• Hilton Honors Card
• Delta SkyMiles Blue American Express Card

Should You Cancel Store Credit Cards?

If the store card does not have an annual fee, I recommend keeping it around as a sock drawer card. The card is part of your credit history, and sometimes you can still benefit from the card when you shop at the respective store.

For example, the Nordstrom credit card comes with $100 in alteration credits and double point days. If you find yourself at a Nordstrom sale, it might be beneficial to use the Nordstrom card for purchases.

I generally don’t recommend opening store credit cards since travel cards offer more benefits, and the cards take up a Chase 5/24 slot. However, if the card is already open and doesn’t have an annual fee, there’s no harm in keeping it around.

If you’re worried about monitoring the card, then set up email alerts for transactions. \

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