Should I Cancel My Travel Rewards Credit Card During a Pandemic?
With the pandemic canceling fall plans like personal lessons and college football , you might not expect to travel until 2020 – and beyond. With all the travel restrictions, you might be thinking about your bonus credit card , the hefty annual fee, and whether it makes sense to keep it.
Opinions have been mixed over the past five months. A recent survey by CreditCards.com found that 81% of people who use annualized credit cards believe they get the same or more value from their bonus cards, such as extra points on products . However, a new survey from ValuePenguin showed that the opposite is true – 30% of those surveyed closed at least one reward card.
If you’re nearing a different annual fee, it might be time to weigh the pros and cons of keeping your credit card for travel rewards. Here are a few things to consider before making a decision.
List the latest card benefits
Start the process by listing all the benefits for the cardholder, including how you can receive and redeem rewards. During a pandemic, your credit card may offer other features. Some companies have changed the benefits and benefits for cardholders left at home.
For example, Chase Sapphire Reserve – one of the premium travel reward credit cards – is offering new temporary benefits . The company’s benefits for pandemic protection include 5 points for Instacart shipping, a $ 50 credit for Instacart Express membership, 5 points for refueling, and 10 points for streaming services through September 30th.
After listing your full benefits – including which benefits you will be using – it may be easier to assess whether it is still worth paying the annual premium.
Risks of Credit Card Closure
The biggest disadvantage of closing your travel reward card can be a temporary drop in your credit score. Closing any credit card can affect two parts of your credit score: credit usage and credit history. Together, these factors can affect 45% of your credit score .
The use of your credit – or the percentage of your total credit limit that you use – is 30% of your credit rating . You should aim to use a loan of 1% – and closing a credit card can increase this percentage depending on your current balance. If your bonus card is older, you also risk damaging the length of your credit history, which is 15% of your credit rating.
Another risk of closing your bonus credit card is the possible loss of access to your rewards. For example, canceling your Chase Sapphire Reserve card will void your Ultimate Rewards balance. If you have a large balance of points – think about how much they cost and how they are used – before making a decision.
Closing your credit card too early can also hurt your relationship with the bank. According to The Points Guy , you should never close a credit card before you hit the one year mark. The company may report abuse or misuse to you that could prevent future credit cards from being approved.
Ask your credit card to waive commission
If you decide to keep your credit card for the ride reward, call to see if they waive the annual fee. The wait times can be much longer than usual, so you will have to be patient, but waiting to speak with a representative can pay off.
When you go through the automatic telephone system, NerdWallet suggests avoiding the word “cancel” because the computer might void your card before you have a chance to speak with a representative.
Million Mile Secrets says you can have more funds if you are a good buyer – with timely payments and regular card use. The company may wish to reduce or eliminate your annual fee to save your business, although this may be less likely with travel premium reward cards. Even if the company doesn’t change your annual premium, it might oppose a retention offer – like bonus points or a statement credit – that could offset some of the costs.
Consider a credit card downgrade
If your credit card company doesn’t waive your annual fee, or provides a good enough retention offer, you might ask if you can upgrade to the no-annual fee option. You may be able to keep your credit limit and reward balance intact by switching to another card. However, this will not be an option for every travel promotion credit card.