3 Reasons To Cancel Your Credit Card (And How To Do Just That)

Besides the obvious reason of decluttering unused credit cards, there are good reasons why you might want to cancel your credit card. While it’s easy to sign up for credit cards, the same can’t be guaranteed for those looking to bid goodbye to their cards. 

In this guide on why you should consider cancelling your credit card, we’ve included handy tips on how you could do just that, along with a quick crash course on choosing the card you want to cancel as well as the things you need to do before you cancel credit card(s).

Reasons why you should consider cancelling your credit card(s)

#1 Renew eligibility for sign-up bonuses

Banks reserve their best gifts and sign-up offers for new-to-bank customers. Take a look at the exclusive offers and gifts available on SingSaver if you need more convincing. These awesome bonuses are in addition to any welcome bonuses the bank might offer, such as Citibank’s credit card sign-up bonus of up to 45,000 Citi Miles when new-to-bank customers apply for the Citi PremierMiles and spend $9,000 within three months of card approval. 

Citibank defines an ‘existing customer’ as one who currently holds any Citibank credit card, or has done so in the past 12 months. Fortunately, there is a way to become new-to-bank once more. If you cancel your unused Citibank credit cards and don’t get any new ones within a 12-month period, your status will be ‘reset’ and you’ll be eligible for new-to-bank bonuses once again.

Here’s how long you need to be away from a bank to be counted as ‘new-to-bank’. Keep in mind this definition may change depending on the promotion in question, so it’s best to check the specific T&Cs.

Therefore, if you’re not actively using some of your credit cards, it makes sense to cancel them so you can take advantage of new offers down the road. 

#2 Avoid orphan points

For example, I may have an OCBC Titanium Rewards card because it gives me 4 miles per dollar on online and offline shopping. However, if I only shop occasionally, I may not have earned enough points to transfer to miles. OCBC requires a minimum of 25,000 OCBC$ (or 10,000 miles) per transfer, and until I hit this minimum block, my points are effectively stuck. 

This is the problem of ‘orphan points’. 

Orphan points arise because banks specify minimum conversion amounts for transfers to frequent flyer programs.

• SCB: 2,500 SCB points (1,000 miles) for the Visa Infinite Card, 3,500 SCB points (1,015 miles) for the SCB Rewards+ card

• Citibank: 25,000 Thank You Points (10,000 miles) for the Citi Prestige & Citi Rewards card, 10,000 Citi Miles for the Citi PremierMiles card

• HSBC: 5,000 HSBC Points (2,000 miles)

• DBS: 5,000 DBS points (10,000 miles)

If you only use a card occasionally, it’s better to cancel it than to add to your orphan points problem every time you swipe.

#3 Avoid paying unnecessary annual fees

Most credit cards waive the first year’s annual fee automatically, but waivers in the second year are usually based on how much you’ve spent on the card. If it’s just been collecting dust in your drawer, it’s highly unlikely you’ll get a fee waiver. 

So if you’re certain a card isn’t part of your current spending plans, pre-emptively cancelling it can save you some time (and money) later on.

What you should do before cancelling credit cards

Here are a few points to note before you cancel your credit card. 

#1 Clear any outstanding balances

Presumably, you’re cancelling a card because you seldom use it, but it’s always best practice to double check there are no outstanding amounts due anyway. Remember: outstanding amounts don’t just include whatever appears on your most recent statement, there may also be pending amounts that have not been posted to your account yet. 

#2 Redeem your rewards points

Some banks pool points from different credit cards. For example, if I have a UOB Lady’s Card and a UOB PRVI Miles Card, the UNI$ earned will be held in a single account. In these cases, cancelling one card (provided it’s not my last card with the bank) does not lead to the forfeiture of any points.

However, other banks may not pool points. For example, if I have a Citi Rewards and a Citi Prestige card, the ThankYou points are held in two separate accounts. This means that cancelling my Citi Rewards Visa will lead to a forfeiture of all my points. 

Before you cancel a card, be sure to find out if your bank pools points. If they don’t, cash them out first!

*The OCBC VOYAGE earns VOYAGE Miles, which do not pool with OCBC$

^Refers to Platinum cards earning Membership Rewards points; co-brand KrisFlyer cards automatically credit miles to KrisFlyer account

How to choose which credit card to cancel

Consider the following when picking which card to bid goodbye to. 

#1 Do you actually use the card?

If you’re an active user of the credit card because of the rewards you can earn or perks you can enjoy, it would be silly to forgo the benefits and perks for 12 months just to ‘reset’ your status as a new-to-bank customer.

#2 Do you actively use another credit card from the same bank?

If your answer is a resounding yes, then ‘resetting’ yourself as a new-to-bank customer to take advantage of sign-up promos in the future wouldn’t work — you are still an existing customer. 

#3 Will your credit score be affected?

If you carry a balance on some of your credit cards, cancelling a card with a zero balance may negatively impact your credit score nonetheless. This happens because your credit utilisation percentage increases.

Consider the scenario below where John holds two cards, A and B. Card A has a balance of $1,000 and a limit of $5,000. Card B has a balance of 0 and a limit of $10,000.

When John cancels Card B, his total credit limit decreases from $15,000 to $5,000, but his outstanding balance remains the same. This means he is using 20% of his credit limit, 3X what he was before!

Cancelling a credit card with a long history of on-time payments may also be detrimental to your credit score, so if you’re intending to apply for a loan anytime soon, try to prioritise cancelling recently-acquired cards. 

Tips on how to cancel credit card

#1 Plan for the call

Check your bank’s operating hours first; it’s best to call during their office hours on weekdays to reduce the time spent being put on hold. Also, some banks do not entertain cancellation requests outside of office hours.

Make sure you have reserved a good block of uninterrupted time for the phone call. You may want to turn on your speakerphone so you can multitask while being put on hold.

On another note, some banks like UOB and Citibank let customers key in their cancellation request via the phone menu, or through the app, for further review. In such cases, there’s no need to speak with a real customer service officer at all.

#2 Do not share more information than necessary

When requesting cancellation, you can simply cite low usage as the reason for cancelling.

At this point, the customer service officer may ask follow-up questions like:

• But did you know about the so-and-so benefits of this credit card?

• What about the other credit cards that we offer?

• Which competing credit card are you using?

For each question, you can simply repeat that you don’t use the credit card or its benefits. You are not obliged to inform the officer about which other credit cards you prefer; you can just say you don’t use any.

To speed up the cancellation process, simply avoid giving answers that the officer can work with. You also don’t have to give further information about your spending habits.

#3 Beware of the counteroffer

Some credit card providers are so keen to retain you as a customer that they will even dangle a counteroffer if you agree to not cancel the credit card.

Although some of these customer retention offers may be attractive, make sure you ask for the terms and conditions before agreeing to it. The terms may include retaining the card for a stipulated period (e.g. 12 months); if you do not, the bank can claw back the offer.

If you choose to accept the offer, make sure that the annual fee is waived for the retention period. Save a copy of the terms and conditions, and set a reminder to cancel the credit card when it’s time.

Conclusion

So you’ve finally managed to cancel your credit card — but what are the benefits?

For a start, the fewer credit cards you have, the easier it is to keep track of your bills and pay them in full and on time. This good payment behaviour should improve your credit score over time.

With fewer credit cards, you also get fewer opportunities to overspend. Credit card companies work hard to come up with attractive retail promotions to tempt customers. So once you are out of the marketing system, you will no longer have these excuses to shop.

Banks reserve their best gifts and sign-up offers for new-to-bank customers. Take a look at the exclusive offers and gifts available on SingSaver if you need more convincing. These awesome bonuses are in addition to any welcome bonuses the bank might offer, such as Citibank’s credit card sign-up bonus of up to 45,000 Citi Miles when new-to-bank customers apply for the Citi PremierMiles and spend $9,000 within three months of card approval. 

Citibank defines an ‘existing customer’ as one who currently holds any Citibank credit card, or has done so in the past 12 months. Fortunately, there is a way to become new-to-bank once more. If you cancel your unused Citibank credit cards and don’t get any new ones within a 12-month period, your status will be ‘reset’ and you’ll be eligible for new-to-bank bonuses once again.

Here’s how long you need to be away from a bank to be counted as ‘new-to-bank’. Keep in mind this definition may change depending on the promotion in question, so it’s best to check the specific T&Cs.

Therefore, if you’re not actively using some of your credit cards, it makes sense to cancel them so you can take advantage of new offers down the road. 

For example, I may have an OCBC Titanium Rewards card because it gives me 4 miles per dollar on online and offline shopping. However, if I only shop occasionally, I may not have earned enough points to transfer to miles. OCBC requires a minimum of 25,000 OCBC$ (or 10,000 miles) per transfer, and until I hit this minimum block, my points are effectively stuck. 

This is the problem of ‘orphan points’. 

Orphan points arise because banks specify minimum conversion amounts for transfers to frequent flyer programs.

• SCB: 2,500 SCB points (1,000 miles) for the Visa Infinite Card, 3,500 SCB points (1,015 miles) for the SCB Rewards+ card

• Citibank: 25,000 Thank You Points (10,000 miles) for the Citi Prestige & Citi Rewards card, 10,000 Citi Miles for the Citi PremierMiles card

• HSBC: 5,000 HSBC Points (2,000 miles)

• DBS: 5,000 DBS points (10,000 miles)

If you only use a card occasionally, it’s better to cancel it than to add to your orphan points problem every time you swipe.

Most credit cards waive the first year’s annual fee automatically, but waivers in the second year are usually based on how much you’ve spent on the card. If it’s just been collecting dust in your drawer, it’s highly unlikely you’ll get a fee waiver. 

So if you’re certain a card isn’t part of your current spending plans, pre-emptively cancelling it can save you some time (and money) later on.

Here are a few points to note before you cancel your credit card. 

Presumably, you’re cancelling a card because you seldom use it, but it’s always best practice to double check there are no outstanding amounts due anyway. Remember: outstanding amounts don’t just include whatever appears on your most recent statement, there may also be pending amounts that have not been posted to your account yet. 

Some banks pool points from different credit cards. For example, if I have a UOB Lady’s Card and a UOB PRVI Miles Card, the UNI$ earned will be held in a single account. In these cases, cancelling one card (provided it’s not my last card with the bank) does not lead to the forfeiture of any points.

However, other banks may not pool points. For example, if I have a Citi Rewards and a Citi Prestige card, the ThankYou points are held in two separate accounts. This means that cancelling my Citi Rewards Visa will lead to a forfeiture of all my points. 

Before you cancel a card, be sure to find out if your bank pools points. If they don’t, cash them out first!

*The OCBC VOYAGE earns VOYAGE Miles, which do not pool with OCBC$

^Refers to Platinum cards earning Membership Rewards points; co-brand KrisFlyer cards automatically credit miles to KrisFlyer account

Consider the following when picking which card to bid goodbye to. 

If you’re an active user of the credit card because of the rewards you can earn or perks you can enjoy, it would be silly to forgo the benefits and perks for 12 months just to ‘reset’ your status as a new-to-bank customer.

If your answer is a resounding yes, then ‘resetting’ yourself as a new-to-bank customer to take advantage of sign-up promos in the future wouldn’t work — you are still an existing customer. 

If you carry a balance on some of your credit cards, cancelling a card with a zero balance may negatively impact your credit score nonetheless. This happens because your credit utilisation percentage increases.

Consider the scenario below where John holds two cards, A and B. Card A has a balance of $1,000 and a limit of $5,000. Card B has a balance of 0 and a limit of $10,000.

When John cancels Card B, his total credit limit decreases from $15,000 to $5,000, but his outstanding balance remains the same. This means he is using 20% of his credit limit, 3X what he was before!

Cancelling a credit card with a long history of on-time payments may also be detrimental to your credit score, so if you’re intending to apply for a loan anytime soon, try to prioritise cancelling recently-acquired cards.

Check your bank’s operating hours first; it’s best to call during their office hours on weekdays to reduce the time spent being put on hold. Also, some banks do not entertain cancellation requests outside of office hours.

Make sure you have reserved a good block of uninterrupted time for the phone call. You may want to turn on your speakerphone so you can multitask while being put on hold.

On another note, some banks like UOB and Citibank let customers key in their cancellation request via the phone menu, or through the app, for further review. In such cases, there’s no need to speak with a real customer service officer at all.

When requesting cancellation, you can simply cite low usage as the reason for cancelling.

At this point, the customer service officer may ask follow-up questions like:

• But did you know about the so-and-so benefits of this credit card?

• What about the other credit cards that we offer?

• Which competing credit card are you using?

For each question, you can simply repeat that you don’t use the credit card or its benefits. You are not obliged to inform the officer about which other credit cards you prefer; you can just say you don’t use any.

To speed up the cancellation process, simply avoid giving answers that the officer can work with. You also don’t have to give further information about your spending habits.

Some credit card providers are so keen to retain you as a customer that they will even dangle a counteroffer if you agree to not cancel the credit card.

Although some of these customer retention offers may be attractive, make sure you ask for the terms and conditions before agreeing to it. The terms may include retaining the card for a stipulated period (e.g. 12 months); if you do not, the bank can claw back the offer.

If you choose to accept the offer, make sure that the annual fee is waived for the retention period. Save a copy of the terms and conditions, and set a reminder to cancel the credit card when it’s time.