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Credit Card Exit Strategy
A couple months back, I read the unfortunately-titled article about how you “fly first class around the world for free.” I then found your blog, quickly realized the reality of your hobby, and instantly got hooked.
A few weeks back, you indicated in a blog post that you earn a substantial sum of your points from credit card sign up bonuses. With a specific goal in mind, I signed up for a couple credit cards, received the bonuses, then moved on. In a few months, the annual fees will hit, and these cards are NOT worth their fees to me. What is your exit strategy from credit cards when you wish to cancel and avoid an annual fee? Do you cancel them outright, ask that the account be demoted to a fee-free version, or something else?
I would appreciate any insight you may have on the matter. Thanks a lot.
[USER=950]@DogMikey[/USER] – welcome! You ask a very good question. Ben put together this blog post just over a year ago in response to questions like yours. It should still apply but if you have further questions, feel free to ask!
Thanks a lot, but it doesn’t answer my question of exactly HOW to terminate an account that I deem to not be worth the AF. Do you recommend cancelling it outright, requesting a conversion to a fee free card, or something else?
It can just depend on which bank and card(s) you’re dealing with as well as what other cards you have open. Do you mind giving us a specific example? We might be able to provide more useful advice that way.
[QUOTE=”MidSouth Skier, post: 9916, member: 184″]It can just depend on which bank and card(s) you’re dealing with as well as what other cards you have open. Do you mind giving us a specific example? We might be able to provide more useful advice that way.[/QUOTE]
Sure. I have the Amex Gold Delta and Chase UA Explorer cards, which I have decided are not worth the annual fees. I am considering the Ink Plus, but that would just be for the bonus (yes, I plan on keeping the Sapphire Preferred).
Any insight on the best exit strategy for these 3 cards, and why individual cards make a difference?
Well there are a couple of different schools of thought on this and in practice it may vary depending on what the options are at the issuer.
Some people prefer to ask for a downgrade to a no fee card. This is definitely preferable if you have a short credit history as it allows you to built a good credit history making future approvals a little easier. You can also then use this credit line/account to trade off for a new approval in the future. However, some cards don’t have an easy downgrade option. In that case you might consider requesting that your credit line be transferred to a another card with the bank and the account be closed down. Again this will improve your credit score as your total available credit remains high keeping utilization low. This decision may also be affected by your bank’s rules about when you can reapply for a card.
I’ve heard more reports recently that people who have been doing this for a while are more comfortable just canceling a card outright. The theory is that each bank is willing to extend a total amount of credit to a person and if you are maxed out you have to call in and do the dance with a reconsideration agent. By canceling a card you open up some breathing room on your credit and improve your chances of getting an automatic approval in the future.
Both the cards you mention don’t usually waive the annual fee (may be exceptions if you’ve spent a lot of money on them but otherwise unlikely). I would ask for a downgrade. I believe DL has a SkyMiles Options card that is free and earns 0.5m/$. I have an old United no-fee Chase card as well. Not sure if that is still available as a no downgrade option but feel free to call and ask.