Free First Class Next Month: Credit Card Cancellation Negotiations

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Hey there, you’re reading an outdated post! The updated series from April 2015 can be found here.

This is the twelfth post in a monthlong series. Each post will take about two minutes to read and may include an action item that takes the reader another two minutes to complete. I am writing this for an audience of people who know nothing about frequent flier miles, and my goal is that by the end, you know enough to fly for free anywhere you want to go.

Credit cards are the gift that keeps on giving. A single card gives you so many opportunities to exploit: a huge sign up bonus, some category bonuses along the way, and other ancillary benefits. There’s one more major source of money or miles in your card though: credit card cancellation negotiations.

Credit card companies want you to keep their card. If you keep their card, you might spend on their card. If you spend on their card, they make money. So if you call up and mention that you’re considering cancelling their card, the banks will very often make you an offer to keep the card. Let’s go through the whole process.

All the cards in the frequent flier mile game have an annual fee. (Many cards waive the fee for the first year, but every card is going to charge you a fee twelve months in.) Before this annual fee comes up, I cancel the card. I focus my spending on clearing new bonuses, so I don’t need to keep old cards. With that in mind, here’s the life of a card in my employ.

1. Get the card.

2. Earn the bonus. Hit the minimum spend requirement in the time frame given.

3. Put the card in my sock drawer. When I’m not clearing the bonus, I don’t use the card usually. I’ve moved on to my next bonus.

4. Eight months after getting the card, with four months until the annual fee, I call the number on the back of the card.

5. I negotiate for the best possible retention bonus.

6. After meeting any retention bonus challenge, and eleven months after getting the card, I call up to cancel the card. I ask that the credit line be transferred to another card I have with that bank. I cut it up and throw it away.

Let me explain steps 4-6 more fully. Call up the number on the card. When you get a human on the phone, say politely, “I’m calling to cancel the card. I’m concerned about the annual fee.”

The representative may agree and allow you to cancel the card without offering you anything. In this case, I would hang up without cancelling the card. Maybe calling back in a week or a month will net a better result.

In most cases, though, the representative will offer you a deal to keep the card. The deal may take several forms. To keep my Delta SkyMiles card, I was offered 7,500 SkyMiles. To keep my Citi AA Amex, I was offered an $85 statement credit after five purchases of any size. To keep my Citi AA Visa, I was offered 3 miles per dollar spent for the next six months.

After the representative offers you a deal to keep the card, ask if there are any other offers. If they offered me a statement credit, I usually say, “Are there any miles offers?” And vice versa.

I then take a minute to consider which offer is best among my choices. Of course, to answer that, you need to have a value for the mile in question. I think the offers that give 3 miles per dollar on all spending for six months are usually the weakest offer. A one time cash or miles bonus is better because it lets me focus my spending where I’m getting way more than 3 miles per dollar: clearing new sign up bonuses.

I do all that seven months after getting my card. The reason I do it five months before the annual fee is due is that sometimes I don’t get a retention offer, so I want to be able to call back later to see if I can get one. Also sometimes it takes a month or two for the retention bonus to post. And I want the retention bonus to post before the annual fee is due because the final step is cancelling the card.

Yes, you got a retention bonus for not cancelling the card when you called at the seven month mark. But that doesn’t mean you can’t cancel the card later. In my experience, I’ve received the bonus, cancelled the card, avoided the annual fee, and not seen the bonus clawed back in any way. One thing to remember while cancelling the card is to ask to have the credit line moved to another card issued by the bank before you cancel.

Example: You have a the Citi AA Amex with a $6,000 credit line and the Citi Forward card with a $6,000 credit line, and you’re cancelling the AA Amex. Ask to have the $6,000 line moved to the forward card, giving you a $12,000 line there.

The reason you want to do this is that part of your credit score is determined by what percentage of your credit line you’re using. Decreasing your total credit line will increase the amount of your credit line you’re using thus lowering your credit score.

This post covered two important concepts. One is that very few cards are worth holding on to when the annual fee is due. And the other is that you can get a retention bonus if you tell the bank you want to cancel your card. Make sure to make the phone call saying you want to cancel every card you own at least once because the call usually nets you around $100 in cash or miles.