That’s a common misconception that’s been floating around for years, and is occasionally fed by poorly informed customer service agents for credit card companies (or the occasional agent who make win points for preventing you from cancelling and who resorts to unscrupulous tactics as a result).
A former boss emailed me about 10 days back,
Tried to cancel my American Airlines credit card — nowhere near the Gary Leff quarterly churn, but trying to do better than once a decade — and the rep told me I’ll lose the miles I’ve earned with it once I’ve gone without using the card for 18 months. Does that sound right?
Of course, American Airlines miles will be forfeit after 18 months of inactivity. To keep an AAdvantage account active, and continue to extend the life of your miles, you just need some activity — any activity — every year and a half.
You can charge something to your credit card to earn miles, you can take a flight, you can credit a car rental, you can buy miles or transfer them into your account from someone else. There are myriad things you can do to generate account activity and push out the expiration date on your account by 18 months.
One of the really need things about Starwood’s Platinum level is that they will let you transfer miles in any amount to their airline partners. (Golds have to transfer at least 1500 points and general members 2500.)
That means a Starwood Platinum can drop 1 mile into an American or US Airways account every 18 months to keep their accounts active.
But cancelling a credit card does not forfeit the points in your account, the points earned from that credit card, or the signup bonus generated by obtaining that card. Except that some cards do contain language in their terms and conditions if you cancel within the first 6 months of cardmembership the bank may claw back the signup bonus.
This is very rare. There are very occasional reports of this, almost akin to urban legends. But it’s advisable not to cancel a new card within 6 months for this reason.
Of course it’s advisable in most cases not to cancel a new card within 6 months anyway. It’s usually a good idea to keep a card until it’s been nearly a year. As the annual fee approaches folks will often be offered something of value that makes it worth keeping the card. Or having the card can be useful as something to trade in exchange for approval of a new card. If you aren’t automatically approved, offering to give up the card you have can get you an approval (but cancelling a card first — while it may increase the likelihood of an automatic approval — doesn’t guarantee that a bank will re-extend the credit to you that you had before.)
I rarely ever cancel a card proactively without asking the issuing bank if there’s a reason to keep it (retention bonus), or using the credit in trade for a new card approval.
Still, I’m not worried about what happens if I do cancel the card. They won’t claw back the miles earned (though in some cases they have the little-used right to if you cancel during the first 6 months).
In other words, no worries. This canard circulates with some regularity, but it just isn’t so.
Update: to be clear this post is about an airline or hotel co-branded credit card, you don’t lose the points you’ve earned in the airline or hotel credit card program.
With a bank’s program — such as American Express Membership Rewards or Chase Ultimate Rewards — where the points are in the program that is associated only with having a credit card, then naturally you need to have a credit card account open to continue to access those points.
If you are going to cancel a Chase Ultimate Rewards card, transfer the points out to another open Chase card before doing so (and if you will have no more cards left, make sure to redeem before cancelling).
If you are going to cancel an American Express Membership Rewards card, that’s fine as long as you retain an open American Express Membership Rewards-earning card linked to that account. If you’re closing your last or only Membership Rewards-linked card, make sure to redeem your points first.
Same theory, more or less, applies to other bank proprietary programs (like Capital One, Wells Fargo, etc).