Canceling a Credit Card? Do These 2 Things First

You may be canceling your card, but you can still get some value out of it.

Although you shouldn't make a habit of opening and closing credit cards, there are times when it doesn't make sense to keep one of them. If you never use a card or it has an annual fee you don't want to pay, then canceling it could be the right decision.

Once you cancel a card, it's gone, which means you can no longer use its rewards or benefits. That's why if you're sure you want to cancel, you should do each of the following first.

1. Use your rewards

Credit card rewards typically expire as soon as the card is canceled, so you don't want to leave yours unused. With cash back cards, this is simple, as you can get your cash back through any of the redemption methods your card offers.

It can be more complicated with travel rewards cards, which often have a variety of redemption options. Here are a few potential ways to use travel rewards before canceling a card:

• Transfer them -- Many travel cards have multiple airline and hotel partners where you can transfer your points.
• Book travel -- If your card doesn't offer points transfers or you have travel you want to book, then you can use your points to help book that trip.
• Redeem them for a gift card or cash back -- You usually won't get nearly as much value if you use travel points to get a gift card or cash back, but if you don't have any other convenient options, you can at least get something from your points this way.

If your card is part of an airline or hotel loyalty program, you typically won't need to worry about redeeming rewards before canceling it. Any points that are already in your account will remain there, and closing your card doesn't close your account in the loyalty program. You should, however, check the program's expiration policy so you know how long your points will last.

Another thing to keep in mind is that both cash-back and travel cards often have redemption minimums. A redemption minimum may mean you can't get your rewards balance all the way down to zero, but you can at least redeem as many points as possible.

2. Take advantage of the card's benefits

If your credit card has any perks that could be valuable, then you should make sure to use them before you cancel.

The most obvious example is spending credits. For example, if a card has a $300 annual credit on your travel spending, there's no good reason to cancel the card before you've exhausted the entire $300. You don't want to leave money on the table.

I recommend reviewing the card's full list of benefits to see if there's anything you can make use of before you cancel it. If you have a flight coming up and your credit card offers airport lounge access, you should probably hang on to it until after the trip. If your card offers a free night in a hotel, see if you can redeem it.

Give yourself time before canceling a credit card

Both of the steps above take time, which is why canceling a credit card should never be something you rush through at the last minute. If the card has an annual fee you want to avoid, get started on redeeming rewards and reviewing its benefits at least one to two months before you need to pay the fee. If you give yourself enough time, you're more likely to maximize the card's value before you let it go.