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The one thing that people most frequently get hung up about when it comes to travel reward credit cards is the annual fee. It hard to find a travel rewards credit card that doesn’t charge $50-$450 per year for the privilege of earning points and miles. If it doesn’t, the perks and points are often less than impressive. Sure, some companies offer to wave the annual fee the first year, but after that, is it worth paying the price? Are the rewards worth the cost? We’ll help you figure out if you should cancel or downgrade your credit card.
Popular Annual Fee Travel Reward Cards
Most of the most lucrative travel rewards cards come with an annual fee. The Chase Sapphire Preferred® Card is $95 per year. You can collect 60,000 bonus points after meeting the minimum spending requirement of $4,000 in 3 months.
The Platinum Card® from American Express comes with a very high annual fee of $550 (See Rates & Fees) but comes with a suite of benefits that may be beneficial to some travelers. Plus you get 60,000 points if you spend $5,000 in the first three months.
The Citi ThankYou Premier Card offers a generous 50,000-point bonus after spending $4,000 in three months. It comes with a $95 annual fee waived the first year.
Airline credit cards also offer generous sign-on bonus and fees that are typically waived the first year.
No Annual Fee Reward Cards
If you don’t want a reward card with a fee or are planning to cancel or downgrade your credit card that carries a high annual fee, there are a few cards to choose from.
The Capital One VentureOne card is one of them. The rewards aren’t as good as the Capital One Venture, but it still comes with its own set of unique benefits. It offers 1.25x miles per dollar spent, plus 20,000 bonus miles after you spend $1,000 in the first three months of account opening.
This is equal to $200 in travel. You won’t get that bonus if you are downgrading from the Venture card, but it is available to new cardholders. However, the Capital One® VentureOne® Rewards Credit Card is still worthwhile.
The Chase Freedom card and Chase Freedom Unlimited card are a couple more. The Freedom offers up to 5% cash back or 5x Ultimate Freedom points per dollar on categories that change every quarter. Plus you’ll get a sign-up bonus of $150/15,000 points if you spend $500 in the first three months.
The Chase Freedom Unlimited® comes with the ability to earn 3% cash back on all purchases in your first year of account opening, up to $20,000 spent. After that, you will earn an unlimited 1.5% cash back on all purchases. Both cards do charge a foreign transaction fee.
Amex also offers a no annual fee card, the Amex EveryDay® Credit Card from American Express credit card (See Rates & Fees). You can earn up to 1.2 Amex Membership Rewards Point per dollar and you’ll get a 20% point bonus if you use the card for 20 transactions in a month. There’s also a 10,000-point bonus if you spend $1,000 in the first three months. Points earned can also be transferred directly to frequent traveler programs.
To Cancel or Downgrade Your Credit Card
If you are considering whether to cancel or downgrade your credit card, keep these facts in mind:
- You may lose any unused points
- Your credit score might suffer if you don’t have many long-standing credit cards in your name
- You likely won’t be able to sign up for that card again for 2 years or more
- You lose any benefits that come with the credit card
For example, in order to use some rewards points, you have to charge purchases to the credit card in order to redeem them. No credit card means no access to points. When you cancel other cards, like ones that earn Chase Ultimate Rewards, Citi ThankYou Points, and Amex Membership Rewards, you run the risk of losing access to those platforms entirely.
As for your credit score, if you have many cards that you’ve had for years, canceling one or two won’t make your score take a dive. But if you regularly open and cancel accounts after only a year, your score could take a hit.
If you signed up for a credit card because of specific benefits, like no foreign transaction fees or free checked baggage, canceling will negate those perks.
Downgrade Your Credit Cards If Possible
The best option and one that bypasses most of the above concerns is to downgrade your card to a no-fee option instead of cancel. Downgrading allows you to:
- Hang on to your points
- Eliminate an annual fee
- Keep your credit score intact
- Retain access to the valuable point and redemption systems
- Retain some card benefits
For example, downgrading your Chase Sapphire Preferred to a Chase Freedom or Freedom Unlimited allows you to continue collecting valuable Ultimate Rewards points. Switching from the Capital One Venture Rewards Credit Card to the Capital One VentureOne Rewards Credit Card means no more annual fee. But, you still have access to the easy-to-use purchase eraser. Plus, you can take advantage of Capital One’s 10x bonus miles earning potential at Hotels.com/venture.
Some downgraded cards even come with similar benefits as their more expensive siblings, like no foreign transaction fees and trip insurance. However, more often than not, point-per-dollar values will weaken with the no-fee cards. But they will help keep your credit score strong and healthy as downgrading doesn’t show up as a cancellation.
Do keep in mind that, typically, you won’t get whatever welcome bonus the downgraded card is offering. But it will go a long way in padding your credit score so when you apply for the next travel reward card with a tempting bonus, your credit score won’t take such a hit.
Just keep an eye out for policy changes like foreign transaction fees or foreign exchange fees so you know what to expect if you plan on using the card while traveling in other countries.
The Bottom Line on Canceling or Downgrading a Credit Card
Basically, if you’re wondering whether you should cancel or downgrade your credit card, keep these things in mind:
- Will canceling hurt my credit score?
- Will I lose my points and miles if I cancel?
- Will I be able to get that credit card again if I change my mind?
- Do I still want access to my card’s specific perks and benefits?
Generally speaking, downgrading to a no annual fee card is almost always a smarter move if you’re considering whether to cancel or downgrade your credit card. It’s a great way to keep the points adding up and keep your account history.
For rates and fees of The Platinum Card® from American Express, please click here.
For rates and fees of Amex EveryDay® Credit Card from American Express credit card, please click here.
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Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airlines or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities.