Factors on Whether to Cancel or Keep a Credit Card
When you have a portfolio of multiple credit cards to keep track of, the question I constantly ask myself, which credit cards should I keep and which ones should I cancel?
Today, I will list the main factors that I give strong consideration to before deciding the fate of my credit card.
Churning
It is no secret that churning is one of the best ways to generate a lot of miles or points in a short period of time. So a question I would ask is whether it is possible to re-qualify for the sign up bonus. Some credit card companies only allow 1 lifetime sign up bonus. Because of this reason, I may be more inclined to retain credit cards from those issuers.
Annual Fees
No annual fee credit cards make it easier to retain long term. That being said, in some cases, an annual fee may be worthwhile, but it will depend on the features and benefits of the credit card.
Features and Benefits
This ties directly in with annual fees. The question is whether the features and benefits of a credit card help justify the annual fee? Certain credit cards offer a lot of perks that if we take full advantage of, it will help justify the annual fees.
Such features and benefits include: automatic elite statuses, free checked bags, free hotel night, priority check-in, lounge access, companion passes, etc.
Earning Ratios
I hope that I will be earning at least 2% or more on every purchase that I make. So every credit card that I have, I am more willing to retain that credit card if they have at least one category of spending that gives me at least 2% and above. Otherwise, I will be cancelling the credit card, or not even apply for it to begin with, unless they offer a strong sign up bonus.
Spending Bonuses
I have isolated spending bonuses from the features and benefits as I feel that this is a very important factor in itself. Personally, I rather not have to churn a credit card, as there are so many loopholes to go through, such as waiting for first year fee promotions, waiting periods in between sign ups, reconsideration lines, etc.
What I have always recommended to credit card companies instead is to offer spending bonuses, which would result is less churning. I will harp on this factor for a little bit.
For instead, if I spent $10,000 on a given year, I would hope that they can easily waive the annual fee the following year. What would be even better is that, let’s say, we go up to $15,000 in spending, then we get an anniversary bonus.
This approach would cost credit card companies less money than having people churning just to re-qualify for the sign up bonus. Unfortunately, the current list in Canada is embarrassingly small. Worse yet, I do not see this changing any time soon, because this is the result of a strong economy (contrary to what we hear in the news). Credit card companies are making too much money, so they have no need to offer more perks to credit card holders. They already have enough clients generating them profits.
It is funny how this works, as competitive is negatively correlated to the number of people using credit card. For there to be increased credit card competition, there needs to be less people using credit cards, in which case companies need to find ways to attract new clients. When there are a lot of people using credit cards, there is no need to go find new clients as the profits are rolling in.
Check out this awesome list (albeit a little old) put together by One Mile at a Time, listing out some of the spending bonus options in the United States to get an idea on what are the possibilities:
| Card | Threshold | Bonus |
|---|---|---|
| Marriott Rewards® Premier Credit Card | $3,000 | Additional one night towards status for every $3,000 you spend |
| Citi® Hilton HHonors™ Reserve Card | $10,000 | Free weekend night certificate valid at virtually any Hilton property worldwide |
| Hawaiian Airlines World Elite Mastercard | $10,000 | 5,000 bonus miles |
| Ritz-Carlton Rewards® Credit Card | $10,000 | Gold elite status |
| Southwest Airlines Rapid Rewards Premier Credit Card | $10,000 | 1,500 Tier Qualifying Points (up to 15,000 Tier Qualifying Points annually) |
| Southwest Airlines Rapid Rewards® Premier Business Credit Card | $10,000 | 1,500 Tier Qualifying Points (up to 15,000 Tier Qualifying Points annually) |
| Virgin America Visa | $10,000 | 5,000 status points for every $10,000 of eligible purchases on your card, up to a maximum of 15,000 status points per calendar year. |
| Fairmont Visa Signature Credit Card | $12,000 | Free night award |
| The Hyatt Credit Card | $20,000 | Two stays and five nights towards status |
| United Mileage Plus Explorer | $25,000 | 10,000 bonus miles |
| Virgin Atlantic World Elite MasterCard® | $25,000 | Companion reward ticket for half the miles |
| US Airways MasterCard | $25,000 | 10,000 Preferred Qualifying Miles |
| Platinum Delta SkyMiles® Business Credit Card and Platinum Delta SkyMiles® Credit Card from American Express | $25,000 | 10,000 bonus redeemable miles and MQMs |
| British Airways Visa Signature® Card | $30,000 | Travel together ticket for companion awards |
| Starwood Preferred Guest® Business Card from American Express | $30,000 | Starwood Gold elite status |
| Starwood Preferred Guest® Credit Card from American Express | $30,000 | Starwood Gold elite status |
| Citi® Platinum Select® / AAdvantage® World MasterCard® | $30,000 | $100 American Airlines flight discount |
| Delta Reserve Credit Card from American Express and Delta Reserve for Business Credit Card | $30,000 | 15,000 bonus redeemable miles and MQMs |
| The Hyatt Credit Card | $40,000 | Additional three stays and five nights towards status |
| Citi® Hilton HHonors™ Reserve Card | $40,000 | HHonors Diamond status |
| Citi Executive AAdvantage World MasterCard | $40,000 | 10,000 American AAdvantage elite qualifying miles |
| American Express Hilton HHonors Surpass Card | $40,000 | HHonors Diamond elite status |
| Platinum Delta SkyMiles® Business Credit Card and Platinum Delta SkyMiles® Credit Card from American Express | $50,000 | Additional 10,000 bonus redeemable miles and MQMs |
| Hawaiian Airlines® Business MasterCard® | $50K-$99K | 20,000 bonus miles |
| Delta Reserve Credit Card from American Express and Delta Reserve for Business Credit Card | $60,000 | Additional 15,000 bonus redeemable miles and MQMs |
| Ritz-Carlton Rewards® Credit Card | $75,000 | Platinum elite status |
| Hawaiian Airlines® Business MasterCard® | $100K+ | 40,000 bonus miles |