When to say Goodbye: Closing or Downgrading

This is a question I had asked A LOT! "So if you're continually opening new cards, do you just have a bazillion credit cards open?!" and the answer, generally, is a handful, but the real answer is no.

For as much thought as I put into the strategy of which cards myself (or my P2) should open; there's often an equal amount of strategy in which cards we should keep open and which are ready to be closed. This post will outline my thought process of determining when I close a card (or downgrade) and why.

Perhaps the most important rule to know about closing a credit card is that you should not close a credit card before you've held it for at least 12 months. Closing a card before the year mark, can put your relationship with the issuing bank in jeopardy AND you risk the bank taking back the points that you've earned. 

When to Close (or Downgrade) a Card

Here are the primary considerations I keep in mind when reviewing what cards "we" (myself or my husband/P2) are holding:

1. If the card has an annual fee; do the card's benefits that you're utilizing outweigh the cost of the annual fee?

Look at each card and confirm what the annual fee is. What benefits does that card offer you and which of those benefits have you actually used in the past year? How often do you use the card in general? If you were to add up the value of each benefit, how does that compare to the annual fee to hold the card?

Currently I have credit cards open that have annual fees ranging from $0 to $795 a year,  I already know that the $795 fee card, the new Sapphire Reserve Business, will NOT be kept in my wallet longer than it has too. Essentially I got the card to take advantage of a high sign up bonus, knowing that I won't benefit from holding this card long term.

However, there are other cards in my wallet, such as the Chase Sapphire Preferred, with a $95 annual fee (that can be offset with an annual $50 hotel credit and $10/mo doordash credit), that I will always hold. Even if I don't utilize those benefits, paying $95/year allows me to transfer points out of Chase to book directly with travel partners (instead of booking in the Chase portal); which is well worth the $95 when it comes to the savings I have to be able to book free travel with points.

My United Mileage Explorer card has a $95 annual fee (currently), but one of the primary benefits it offers is free checked bag for myself and one person on my reservation. With this benefit, if we fly roundtrip United once a year and check two bags; this card pays for itself. Not to mention, it also comes with 2 United Club passes.

Similarly, now with Southwest policy changes doing away with free checked bags, cardholders now get free checked bag for themselves, their companion (if applicable) and up to 8 people on their reservation. The cheapest Southwest card has a $69 annual fee - so if you fly SW solo, at least one round trip or 2-single flights a year, this card pays for itself! I just helped someone get this card because they specifically wanted a card to get free checked bags domestically. Remember... spend smarter, not more ;)

2. You want to get a sign up bonus for a card you already have.... and you can't hold two of the same card

This may be a little more intermediate... but there will be times when a great sign up offer comes out and you may already hold the exact same card. Sometimes you can get around this by closing (or downgrading - more below) your card just to turn around and open the same card. Example of this is the Chase Sapphire.

3. You're starting to get declined from banks with the message that you've been extended too much credit

Yep, this happens. It's happened to both Ben and I. Most specifically with Chase business cards. Once we started getting declined, I started closing out Chase business cards that we (one of us) held for more than 12 months, closing them 30 days apart so as not to arise suspicion. 

4. You're not using it

Why add more to your backburner mental than you need? If you have a card that's older than 12 months and you're not using it, even if it doesn't have an annual fee - there's no reason to keep it open! Keep in mind the smaller convenience benefits, like the free checked bags mentioned above, before deciding to close. 

5. Do you need to keep this card open to transfer points outside of the bank?

This really is geared to having a premium card open with Chase. For Chase, you need to have one of the following cards in order to have the ability to transfer your Chase points to travel partners:

• Chase Sapphire Preferred
• Chase Sapphire Reserve
• Chase Business Ink Preferred
• Chase Sapphire Reserve Business

Remember, transferring points to travel partners and booking travel directly (NOT in the portal), may often give you the best value/lowest point cost travel.

6. Should You keep this card open for referrals?

Referrals can be an easy way to earn a chunk of points without opening a new card. Sometimes it's worth keeping a card open if you have friends/family/significant other who plan to open that card.

What Next? 

Close vs Downgrade

Several cards, especially those with annual fees, may have the option to downgrade to a lower tier card. Lower tier cards often have lower (or no) annua fee, but also lower (or no) useful benefits.

So why would you even downgrade then?!

Downgrading a card is may be the ideal option instead of closing because:

• It lets you keep your points!
• Often times, when you close a card, if you don't have another card or means to move the points; you'll lose them
• If it's a co-branded card (like a Chase Southwest Card or a Hilton American Express; ie a bank/hotel or airline card) you will not lose your points.
• If it's a bank card (like a Chase Sapphire Preferred or an American Express Gold card): if you're closing a card, you have the option to move your points to another card you may already hold from the same bank OR if you downgrade a card, the points will stay with the new downgraded version
• Credit Score
• Remember from this post, Credit History (or average length of credit) makes up 15% of your credit score. If you close your oldest credit card, then depending on what other cards you hold and when you opened them; closing may impact your credit score
• Also from the same post, Credit Utilization accounts for 30% of your credit score. If you're considering closing a credit card that has a large limit, this will then lower your total amount of credit extended, which could in turn, impact your credit score.

Downgrade Options

Okay, so you're intrigued to consider downgrading, but how do you even know if that's an option?!

For one, you can call the bank and ask. I would call and say something along the lines of: "I've realized I'm not longer using this card's benefits fully and I'm wondering if there's a lower tier/lower annual fee card that I could downgrade to instead?"

Here are some common downgrades for popular cards:

• Chase Sapphire Reserve > downgrade to Chase Sapphire Preferred: this allows you to keep your points and your ability to transfer points out of Chase to travel partners, but also lowers the annual fee from $795 (previously $550 prior to June 2025), down to $95/year.

• Chase Sapphire Preferred > downgrade to Chase Freedom that earns ultimate rewards ($0 annual fee). *Remember* you need a Chase premium card to transfer points. BUT on reason you may want to downgrade you CSP, is from Item 2 above. You can potentially get rid of your Sapphire card, wait 30 days, and apply for a new Sapphire card to take advantage of a sign up bonus.
• Chase United Mileage Explorer > downgrade to United Gateway. I'm personally considering this move because the Mileage Explorer annual fee is increasing from $95/year to $150/year. Currently we generally only fly United once a year with having our Southwest Companion Passes. I would choose to downgrade this card to save on the annual fee, but to keep my credit history, since I've held this card since 2016.
• American Express Gold (Personal or Business) > while you can't downgrade to a card without an annual fee, there are lower-tier/lower annual fee cards you can downgrade to, being Green Card or the Business Green Rewards Card. 

Closing a Card

It's okay to close cards too! I personally prefer to close cards via the bank's secure messaging or chat feature; that way 1. I don't have to talk on the phone to anyone and have them try to convince me otherwise. 2. I have written record of the date the card is closed.

Timing of Closing a Card

The most ideal time of closing a card with an annual fee is within 30 days of the annual fee hitting your account (as long as you've had the card open 12 months). This way, you (hopefully) utilized the entire year of benefits that you paid for. If you close within 30 days of the annual fee hitting, generally the bank will credit your account back the annual fee charge once you close.

You can close any card, any time of year (as long as it's been open 12 months), but you won't necessarily get back the annual fee, in which case it may be worth hanging on to the card and trying to utilize some benefits before next year's annual fee.

Summary

Okay, this post is WAY longer than I anticipated, but there's so much information to consider and know before closing a card. I hope this helps!

Remember the most important rule to know about closing a credit card is that you should not close a credit card before you've held it for at least 12 months. Closing a card before the year mark, can put your relationship with the issuing bank in jeopardy AND you risk the bank taking back the points that you've earned. 

If you still have questions or are uncertain about what to do with credit cards you currently hold; feel free to email or instant message and ask for another option!

______________________________________

> Looking for more information on points/miles? You can find all of my points talk posts linked here.

> Curious what cards I (and/or my husband) have, and why? Read here!