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Cancelling Credit Card--Credit Score and Insurance Rates

501 311 October 12, 2019 at 01:59 PM
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I have an airline credit card with an annual fee that I would like to cancel because I no longer fly that airline. I have been a cardholder for more than 20 years with excellent payment history and the company refuses to waive the annual fee.

This is my only card. I read that if I were to cancel it, my credit score would decline. Since I will never obtain a loan or mortgage, I am not concerned about the impact of a lower credit score for those situations, but will there be an impact to my auto insurance rates if I cancel the card?

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#2
Quote from SJGUY99
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I have an airline credit card with an annual fee that I would like to cancel because I no longer fly that airline. I have been a cardholder for more than 20 years with excellent payment history and the company refuses to waive the annual fee.

This is my only card. I read that if I were to cancel it, my credit score would decline. Since I will never obtain a loan or mortgage, I am not concerned about the impact of a lower credit score for those situations, but will there be an impact to my auto insurance rates if I cancel the card?

I am no expert on the insurance score, but to the best of my understanding, some of the same factors that are used to compute your credit score factor into the insurance score.

That said, I would try not to close an account that is your only account and open for 20 years. You should try calling the card issuer (Visa, MC, Amex) and ask if they would switch you to a different, no annual fee card instead of asking them to waive the annual fee. Most CC issuers wil not waive the annual fee but they are usually willing to transfer the account to a different product they have without one.
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#3
The reason your credit score declines when you cancel a credit card is because you have less available credit and your utilization % goes up over the remaining cards/credit lines. Since you've had the card open for a while, it may also lower your average age of credit. I agree with Yanksin2009 to research your options for a no annual fee card with that same card issuer. Call to make the switch. Keep in mind the issuer may limit your card options or not let you switch at all.
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#4
I am unable to downgrade to a non-airline general use card, as the company does not permit it.

If I open up a new credit card first, then cancel the 20 year old card a few weeks later, will that have a negative impact on my credit score?

How often should one call to check on new credit card retention offers?
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Last edited by SJGUY99 October 13, 2019 at 03:54 PM.
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#5
Quote from SJGUY99
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I am unable to downgrade to a non-airline general use card, as the company does not permit it.

If I open up a new credit card first, then cancel the 20 year old card a few weeks later, will that have a negative impact on my credit score?

How often should one call to check on new credit card retention offers?
Is there an airline card with no annual fee you can switch to? Put it in your sock drawer, but set a calendar reminder to buy a $5 Amazon GC or other small purchase every 6-12 months to keep it from going inactive. I doubt the retention offers will change especially with the uncertainty in the economy right now. The airline partner may not permit changing to a non-airline card either.

Opening a new card will certainly help with utilization, but you're credit score will get dinged by the inquiry for a few months. Then closing an old credit line and opening a new line will shorten the average length of credit history. I'm guesstimating the impact would be about the same as just closing the old card.

If you have no other choices, I would close the account. Yes, you're score will drop a few points, but it will likely recover in 6-12 months on its own. Better than paying for something you're not using, IMHO.
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#6
I have called in a few time to different card companies and been told things like:
I can't remove the annual fee, but if you spend $100 in the next month they will issue a credit for the amount of the fee."


I have not asked about changing to another card with them when I was told they wouldn't waive the fee. Thanks for the tip.
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#7
I don't think it will do jack. Sure it'll lower your score for a few months but you're still going to have a good score. It'll still be on the report after canceling and factors in still.
utilization of zero is still zero
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for those that hate spelling mistakes www.walmarts.comCool

bulb save money by checking your insurance every 2 years (and not every 20) Thanks Liberty Mutual for reminding me to shop. The $842 increase this year sums it up. Across the board increase for Ohio....whatever
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#8
Quote from stufine
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I don't think it will do jack. Sure it'll lower your score for a few months but you're still going to have a good score. It'll still be on the report after canceling and factors in still.
utilization of zero is still zero
Credit history\length will be greatly reduced though. 15% of the score is supposedly made up of the length of you credit history\avg length, so closing the only account and replacing it with a new one is going to effectively wipe out the credit history at some point\reduce the avg.
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#9
From Motley Fool
The good news is, cancelling a credit card doesn't remove the account from your credit report. It'll stick around for another 10 years. As a result, your payment history and credit history length remain intact for the next decade.
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#10
I recently downgraded my United Explorer card which has an annual fee to one of their cards that does not have an annual fee. Not sure the airline your card is through but, as others have suggested, you can try this.
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#11
Someone didn't read ^^
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