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Reader Question: What’s the Best Strategy for Closing Credit Cards?

by Scott Mackenzie
Last updated February 24, 2018

Today I’ll answer some reader questions about credit cards. Many of us apply for several rewards cards over the course of each year, and it can be difficult to know when to trade off between cards with similar benefits or how to strategically apply for a new card while planning to close an old account.

3LeftTurns: I have the American Express Platinum Card with a December renewal date. What would be the process to transition to the Mercedes-Benz version of this card, drop the “normal” Platinum Card, and earn the new bonus while keeping the lounge access benefits.

Most offers I’ve seen for an American Express card offering Membership Rewards points (e.g., Platinum, Gold, Green, or Zync) stipulate that you will not receive the sign-up bonus if you have had the same card in the past 12 months (not uncommon among card issuers) or another card also offering Membership Rewards points in the past 90 days, even if it wasn’t the same card. Here’s one such disclaimer for the current consumer Platinum Card offer.

If you are identified as a current American Express® Cardmember, you may not be eligible for this welcome bonus offer. This offer is also not available to applicants who have had this product within the last 12 months or any Consumer ZYNC®, Green or Gold Card account within the last 90 days.

This restriction doesn’t mention another Platinum Card, like the Mercedes-Benz version, nor does it say anything about switching from a business to a personal card or vice versa. But it could be because they don’t anticipate people switching between the “normal” Platinum Card and the Mercedes-Benz version. Footnote #6 for the Mercedes-Benz version does rule out existing cardholders:

This offer is not valid for existing Platinum Card members from American Express.

I can’t recommend an exact strategy since I haven’t tried this trick moving between the two. I suggest canceling your current Platinum Card and opening the Mercedes-Benz version second. That way you won’t be a “current” member. You can try arguing your case with a copy of the T&C. There may be a gap in lounge access, but American Express tends to mail new cards overnight. If the new application is not approved, you can always buy a Priority Pass membership and wait a year.

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Update: Kevin reported in the comments that he was able to apply for a new Mercedes-Benz card while the original Platinum Card was still current, and later cancelled the first card. So it sounds like it works, regardless of any disclaimers!

It would be easier if you operate a small business. I would then recommend you apply for a Business Platinum Card to obtain many of the same benefits of the consumer Platinum Card before you cancel it or ask for a downgrade to a Premier Rewards Gold card.

john: I’ve read on some blogs that when cancelling an old credit card, you should “shift” the credit line to a new card when you apply for a big bonus. How does one actually do this? Would I apply first for the new card and then call in and ask to switch the credit from the old one? Would I apply over the phone and explain it all?

The idea behind shifting a credit line is that your credit score is determined in part by your credit utilization ratio. If you have $10,000 in balances at the end of each billing period, and your total available credit is $100,000, then your utilization ratio is 10%. This number is calculated for individual cards as well as across all available credit lines.

By shifting your existing credit line to another card, you keep your available credit high even after closing a card. You probably can’t move all of it, but it is better to lose only $500 of available credit than $5,000. Chase is the best example of this. Each time you apply for a new card, it re-evaluates your entire profile and assigns you a maximum credit line. You can apportion this among your cards pretty much how you please as long as you keep a minimum credit line of $500 on each card.

All you need to do is call the bank and say you’d like to move X dollars of your credit line from the card ending in 1234 to the card ending in 4321. I usually confirm the new dollar amounts of each card. If you try to move balances from more than one card on the same day, they’ll ask you to speak to a credit specialist, but it’s pretty low key.

I have not tried this with other banks, but I would imagine it’s a similar process. And if they won’t let you do it, at least you tried.

Always apply for the new card first, which you can do online. Sometimes when I’m near my upper limit with Chase the new card will have an absurdly low credit limit, like $1,500 — just enough to issue it in the first place. It stands out when the last card came with a $15,000 limit.

Sometimes the bank will want to negotiate with you, which you can do over the phone or by mail. You can offer to move available credit from the card you want to close. Other times they may want to reduce your available credit on existing cards before approving you, especially if you apply for a business card. I was once asked to give up $5,000 on a personal card in order to get $2,000 on a new business card — a net loss of $3,000.

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About Scott Mackenzie

Scott is a former scientist and business student who created Travel Codex to unravel the complexity of travel loyalty programs. After 11 years in Seattle, he now lives in Austin with his wife and flies over 100,000 miles every year.

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