Reader Questions are answered twice every week by TPG Senior Factors & Miles Contributor Ethan Steinberg.
One of many largest errors I see individuals making after they begin their factors and miles journey is to quickly open tons of journey rewards bank cards, with none plan for what they’re going to do with them. Some playing cards would possibly entice you with a big welcome bonus and others can be long-term keepers, and it’s doable that after 12 months of utilizing the cardboard and experiencing its advantages, you would possibly change your thoughts about it earlier than the annual charge comes due. TPG reader Alex desires to know if it’s OK for him to cancel a bank card earlier than his first account anniversary …
I just lately opened the Delta SkyMiles® Platinum American Specific Card and earned the welcome bonus. I do know I’m by no means going to make use of this card once more (I put all my spending on The Platinum Card® from American Specific). Can I cancel the cardboard now, or will there be any penalty? Will I lose my bonus miles?
TPG READER ALEX
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This is without doubt one of the commonest questions we obtain, however the reply is value repeating loud and clear: By no means, underneath any circumstances, do you have to shut a bank card lower than one yr after opening it. There are an entire host of explanation why this can be a unhealthy concept, however let’s begin with among the penalties Alex would possibly count on from Amex if he had been to do that.
Buried within the phrases and situations of the Delta SkyMiles® Platinum American Specific Card (and almost each Amex card on the market) is the next necessary line (emphasis mine):
“If we in our sole discretion decide that you’ve got engaged in abuse, misuse, or gaming in reference to the welcome supply in any approach or that you just intend to take action (for instance, for those who utilized for a number of playing cards to acquire a welcome supply(s) that we didn’t intend for you; for those who cancel or downgrade your account inside 12 months after buying it; or for those who cancel or return purchases you made to satisfy the Threshold Quantity), we might not credit score the welcome supply to, we might freeze the welcome supply credited to, or we might take away the welcome supply out of your account. We might also cancel this Card account and different Card accounts you might have with us.”
There’s loads of legalese within the phrases and situations of a bank card utility, however for those who’re questioning whether or not Amex is severe about this bit, I can inform you that they’re. Over the previous few years we’ve seen numerous crackdowns and welcome bonus clawbacks for individuals attempting to skirt the principles in numerous methods.
Now some individuals could be considering they’re secure from this as a result of they’ve already spent their welcome bonus, however prior to now we’ve seen Amex take individuals’s Membership Rewards balances into the adverse when clawing again bonuses that had already been spent, and the phrases are clear that Alex would possibly face different disciplinary motion, together with the closure of his different Amex accounts. Merely put, this isn’t definitely worth the threat.
Once I’m analyzing my Amex bank cards annually and deciding which of them to maintain and which of them to shut, there’s one other issue I contemplate. Amex now features a “welcome bonus eligibility” checker that will pop up throughout your utility and provide you with a warning that you just’re ineligible to obtain a bonus, even when on paper you’ve accomplished the whole lot proper (you’ve by no means had that particular card earlier than, and many others.). You’ll discover this alluded to within the card’s phrases and situations proper above the road we simply checked out (once more, emphasis mine):
“Welcome supply not obtainable to candidates who’ve or have had this Card. We might also contemplate the variety of American Specific Playing cards you may have opened and closed in addition to different components in making a call in your welcome supply eligibility.“
Amex and different issuers have clearly been taking strikes to discourage people who find themselves opening bank cards only for the bonuses and never rising into worthwhile long-term prospects. Whereas we don’t know precisely what this Amex’s bonus eligibility algorithm appears for, one frequent report we’ve heard is that individuals who shut playing cards at the one yr mark (i.e. proper after the annual charge posts) discover themselves ineligible to use for extra Amex playing cards sooner or later.
Because of this once I apply for an Amex card, I plan on retaining it for at the least two years, even when I’m primarily within the welcome bonus. This makes me a bit extra selective, as I solely decide playing cards which can be worthwhile sufficient to justify two years value of annual charges. Alex ought to take a look at the advantages of his Delta SkyMiles Platinum Amex card (just like the annual Delta companion ticket) as a result of usually a card’s perks can greater than offset the annual charge.
Associated: Selecting the most effective American Specific card for you
All of that is to say nothing of the potential impression to your credit score rating from closing playing cards sooner than essential. Whereas a couple of months aren’t prone to make an enormous distinction within the grand scheme of issues, 15% of your credit score rating is predicated in your size of credit score historical past, or age of accounts. The longer you retain playing cards open, the extra they’ll increase your credit score rating. Because of this it is best to all the time wait till the final doable second to shut a bank card, and be sure to’ve exhausted all different choices first.
Whereas there’s nothing unsuitable with opening a bank card primarily for the short-term advantage of the welcome bonus, it is best to by no means, underneath any circumstances, shut that card earlier than your first account anniversary. Even then, perceive that for those who make a behavior out of closing playing cards after precisely 12 months, you would possibly end up ineligible for future bonuses or getting your purposes denied.
Thanks for the query, Alex, and for those who’re a TPG reader who’d like us to reply a query of your personal, tweet us at @thepointsguy, message us on Fb or e mail us at data@ .
Featured photograph by Isabelle Raphael/The Factors Man.
joined TPG as a factors and miles contributor in early 2017 and loves sharing his high-value redemption methods with readers. For those who requested him the place he desires to journey subsequent he’d quote Anthony Bourdain and inform you “anytime I am consuming spicy noodles in a bowl, I am pleased.