Cancelling Credit Cards: Will I Get My Annual Fee Back?

There’s no one-size-fits-all solution when it comes to credit cards and it’s best to assess your needs on a case-by-case basis. In general, it’s better to keep credit card accounts open—even ones you aren’t using.

Cancelling a credit card can negatively impact your credit score—but this doesn’t mean you shouldn’t cancel a card if it’s charging you an annual fee and you’re not getting enough benefit from the card. For those who cannot resist overspending, often miss payments, or remain at risk of falling into heavy debt, it may be necessary to close the account to preserve overall financial health.

Divorce can, in many cases, necessitate the termination of joint accounts as well. Retail credit cards from establishments you no longer frequent can offer numerous reasons to cancel cards. A shift in lifestyle can also mean premium credit cards with high annual fees no longer make sense.

It’s generally unnecessary to cancel a credit card before the annual fee comes due, typically at the anniversary of account opening. If a card has an annual fee, you’ll pay it at the beginning of your cardmember year and have all of the relevant benefits for the rest of that year. Cancelling the card before the year ends means you’re missing out on perks you’ve already paid for.

Some card issuers even explicitly advise against doing this. For example, you will find the following in the terms and conditions for some American Express cards:

“If we in our sole discretion determine that you have engaged in abuse, misuse, or gaming in connection with the welcome bonus offer in any way or that you intend to do so (for example, if you applied for one or more cards to obtain a welcome bonus offer (s) that we did not intend for you; if you cancel or downgrade your account within 12 months after acquiring it; or if you cancel or return purchases you made to meet the threshold amount), we may not credit Membership Rewards points to, we may freeze Membership Rewards points credited to, or we may take away Membership Rewards points from your account. We may also cancel this Card account and other Card accounts you may have with us.” (Emphasis ours.)

Several things should be done before cancelling a credit card. Among them are collecting cards from authorized users, cancelling any recurring charges, and moving available credit to another account.

Also make sure you won’t lose any miles, points or rewards you’ve earned with the card. Stipulations regarding the forfeiture of points vary by card and card issuer. A good rule of thumb is that if you’re earning airline miles or hotel points on a co-branded credit card (The Marriott Bonvoy American Express Card, for example), the miles and points will be safe in your airline or hotel rewards account. On the other hand, if you’re earning bank-specific rewards, such as RBC Avion Rewards or Scotiabank Scene+ Points, there may be a risk of losing them. Different lenders have different policies:

• American Express: With American Express, you have one Membership Rewards account for all of your Membership Rewards-earning cards. As long as you retain at least one of these cards, you can close the others without losing your Membership Rewards.
• Scene+ Points: If you close your bank account or credit card associated with the Scene+ program, your Scene+ points will still be available with your Scene+ membership and included in your Scene+ membership account. You’ll need to have at least 24 months of inactivity before your Scene+ points start to expire, and you will be notified before then.
• RBC Rewards Points:  Your RBC Rewards will expire 12 months after you voluntarily close your account or RBC closes your account with cause.

If you don’t have another card to transfer your flexible rewards to, choose which airline or hotel partner is the best for your upcoming travel needs and transfer your points there.

Cancelling credit cards can hurt your credit score, so it’s important to close your accounts in a way that carefully mitigates this damage. The first and most important step is to pay off or at least transfer any outstanding balance. You will not be able to close a card when the debt remains fully outstanding. Even if your balance is zero, it’s still a good idea to wait one more month to ensure there aren’t any last-minute charges you forgot about. Don’t forget to spend any rewards you might have accrued—these may disappear once the card is closed.

Next, you’ll want to contact your issuer, confirm your account balance is zero, and inform them of your desire to close your account. Your issuer will, in all likelihood, pressure you to keep your account open. Some may even offer you incentives to keep your account open. So long as you are insistent, an issuer will close your account. Be sure to get a record of the account closure, either via email or letter.

Check your credit report regularly: after about a month, you should see the account removed or marked as closed upon customer request. Dispute any incorrect information you find as soon as possible. Lastly, you’ll want to destroy the physical card. Even though an account may be closed, identity theft is still possible if the wrong person finds your card.

Before cancelling a card, it may be worth calling the issuer to see if it will extend you a retention offer. Banks know it’s much easier and cheaper to keep an existing customer than to acquire a new one. In some cases, an issuer might provide a statement credit or issue a spending challenge (earn extra points by spending $X).

One last consideration involves your credit score. If the card you’re about to cancel is the one you’ve held the longest, you may want to see if it’s feasible to keep it instead. The length of your credit history accounts for a part of your credit score, and credit utilization matters even more. It may make more sense to downgrade a card to one without an annual fee.

We’ve arrived at the pièce de résistance. You’ve decided to cancel your card, but how long after the annual fee hits do you have to get it refunded? In Canada, no set policy exists with any credit card issuer that guarantees you will get your annual fee refunded but you can call and ask and depending on how that call goes, you may get refunded. Here are some tips to follow to increase your chances.

• Don’t be afraid to escalate the call. If you don’t get the answer you want, always ask to speak to the manager.
• Use a competitor and compare their fees and bonuses. If they think you’re going to switch, they’re more likely to refund you.
• Be polite but focused. There’s no need to yell. Always be polite and empathetic, but keep your eyes on the prize.
• It never hurts to ask. If you don’t ask, you don’t get; the worst they can say is no.
• Bring up your record as a customer. Point out that you’ve been with the company a long time, have always made your payments and that your account is in good standing.

Bottom Line

Now that you know the rules, you can confidently make decisions regarding your accounts and ensure you’re not paying fees for any cards you don’t intend to use. As long as you have considered your options and taken the proper steps, you can confidently cancel any card.