The moment you redeem your credit card rewards can feel exhilarating. Maybe you’ve treated yourself to new merchandise, event tickets, or a free flight. But, when it is time to upgrade your credit card or cancel it altogether, the outcome may not be so joyous.
Depending on the type of rewards card you have, you may lose out on your hard-earned points. Luckily, many providers offer points conversion options or are associated with loyalty programs. And, if you are patient, you may be able to switch credit card companies without having to cut your losses.
Credit Card Rewards Programs
Standard credit card rewards plans fall under two main categories: in-house points and third-party loyalty programs.
In-house programs are those that offer rewards solely through the credit card company itself.
Here are some examples of in-house credit card rewards programs offered in Canada:
- American Express Membership Rewards: Apart from cash back, Aeroplan, and Marriott rewards options, American Express features its own in-house rewards system on many of its cards, including the American Express CobaltTM Card.
- BMO Rewards: Along with many great AIR MILES and cash back credit cards, BMO offers its in-house program on several cards, including the BMO®*Rewards Mastercard®*.
- CIBC Aventura Points: The Aventura line features five unique cards, including the CIBC Aventura®Visa * Card.
- Scotia Rewards: Although Scotiabank partners with American Express and SCENE, it has a robust rewards program of its own, highlighted on many cards, including the Scotiabank PassportTMVisa Infinite* Card.
Brands typically offer third-party points programs by partnering with financial institutions to provide a store credit card. They can do so without compromising the non-credit based side of their loyalty program.
A few examples of credit cards associated with third-party points programs are:
- AIR MILES: Anyone can sign up for an AIR MILES Collector number and earn rewards through AIR MILES and its partners. BMO offers some of the best AIR MILES credit cards including the BMO®AIR MILES®† World Elite®* Mastercard®*.
- Alaska Airlines Mileage Plan: Even without an Alaska Airlines Platinum Plus® Mastercard®, frequent flyers of Alaska Airlines may want to sign up for the Mileage Plan to earn free flights.
- Aeroplan Miles: Members can earn miles toward travel by shopping at their local hardware store, online retailers, or when booking flights. However, TD® Aeroplan® Visa Infinite* cardholders or American Express® AeroplanPlus®* Platinum members may earn points quicker.
- PC Optimum points: Devoted customers of the President’s Choice Financial brand, including Loblaws, Superstore, and Shoppers Drug Mart, can benefit from the PC Optimum program. They can earn more points with the President’s Choice Financial®Mastercard® which can double as a loyalty card as well.
- SCENE: The program is not limited to SCENE®*VISA* Card users and is open to all movie lovers.
Often with third-party programs the rewards points are transferred to the linked loyalty or collector card monthly. The points sit outside your credit card account, so when you cancel your credit card, it shouldn’t affect your rewards.
Cancelling Your Credit Card Too Soon
Many credit cards state the account must remain open for at least 90 days, if not more, to receive welcome offers. So, you could risk losing your rewards. Furthermore, you can harm your credit score. Frequently applying for credit can result in hard inquiries on your credit report and can dock your credit score. Even if you close the accounts, it won’t look good to lenders.
Upgrading or Converting Accounts
If you are loyal to one credit card provider, you may be able to consolidate your points from one card to another within the same company. You may also be able to convert your points.
Within the Scotia Rewards program, cardholders can convert their rewards to SCENE points. And SCENE points are a third-party program. Therefore, the points sit outside the credit account.
Similarly, cardholders can transfer American Express Membership Rewards to Aeroplan or frequent flyer miles. Each provider is different. You should be able to find this information in your credit card package or by calling the card’s customer service line to find out.
What about Cash Back?
Cash back may seem more straightforward. Cards like the Tangerine Money-Back Credit Card allow members to choose how to apply their rewards. Cardholders can use the cash back to reduce their credit card statement balance or they can deposit them directly into a Tangerine Savings Account each month. Likewise, cardholders of the BMO®* CashBack Mastercard®* can choose to deposit their rewards into a BMO chequing, savings, or a BMO InvestorLine account.
However, there are many cards like Scotia Momentum® Visa Infinite* Card, that deposit cash back rewards on an annual basis. You may not qualify for the cash back if you close your account before the specified date. So, timing must be optimal if you choose to cancel your account.
When Is the Best Time to Cancel Your Credit Card?
Before you cancel your credit card, save your points by transferring or converting your balance. And, if all else fails, redeem them! Treat yourself before it’s too late. Rewards credit cards typically have a few options for redemption, including applying your points as a statement credit, purchasing merchandise, gift cards, or even experiences. Although, points generally have a lesser value when redeeming for “cash” or products.
You will also forgo any credit card perks when you close your account. That means you will no longer have access to free companion flights or lounge access, and memberships will also cease to exist. So, use them up while you can!
Lastly, think about your credit score. If your card has an annual fee, you may not want to keep the account open if you aren’t using the card. However, credit cards that don’t have an annual fee may serve you well even when you tuck them away. The length of your credit history can impact your credit score. So, by keeping your account open and in good standing, you’ll make a positive impact on your credit rating.