Playing the rewards game? Don’t lose your rewards when you cancel your card

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Credit cards are designed to work in your favor. If you’re using them to buy food and gas for everyday living, and booking travel to escape everyday living, why not see some returns for your purchases? If you fancy yourself a rewards card strategist, you should know that there are plenty of ways to leverage program flexibility and maximize redemption options. 

In some cases, you may have even considered opening a number of rewards cards, collecting their introductory bonuses and then closing the accounts once the intro periods end. While it can be tempting to rotate credit cards like shoes, playing this kind of rewards game is not the wisest decision.

Rewards programs fine print

If playing the “rewards game” sounds lucrative to you, be advised that it’s something that credit card issuers have thought long and hard about. To insulate themselves against gamers, companies have started to add fine print to address these issues.

Here are the terms governing rewards points for some of the largest credit card issuers.

Credit CardTerms
Amex EveryDay® Preferred Credit CardIf you cancel or downgrade your account within 12 months of opening, or cancel or return purchases you made to meet the threshold amount, American Express will not credit the Membership Rewards points. Your points may also be frozen or taken away.
Bank of America® Travel Rewards Credit CardAs long as your account remains open with active charging privileges, points do not expire. If you voluntarily close the account, any unredeemed points associated with the account are subject to immediate forfeiture, unless specifically authorized by Bank of America.
Chase Sapphire Reserve®Your points don’t expire as long as your account is open, but you will immediately lose all of your points if your account is closed.
Discover it® Cash BackCash back rewards will be applied after 12 consecutive billing periods. If the account is closed at that time, the cash back will not be matched.
CITI® Double Cash CardIf you close or convert your card account, you can no longer earn cash rewards. You must also redeem any eligible cash rewards prior to account closure or cash rewards will be forfeited.

Despite these stipulations, there are cases where your points may not be lost after cancelling a credit card. “If the card has a general cash back program, the points will probably be lost,” says David Bakke, personal finance expert at Money Crashers. “But if you have a hotel-specific or airline-specific card, the rewards may not be lost. So basically, your options are simple. If you have a credit card with a generic rewards program,  either use them or transfer them to another card if possible; otherwise, you might lose them.”

Remember, rewards are part of your bigger credit picture

Opening a lot of credit cards in a short period of time is also likely to affect your credit score. Whenever you apply for a credit card, the issuer takes a look at your credit report to determine your creditworthiness. This is called a hard inquiry. A hard inquiry can stay on your credit file for up to two years, and can negatively impact your score.

When issuers look at your credit report and see so many hard inquiries for new accounts in such a short period of time, it communicates that you have an erratic credit history. It won’t take long for them to see that you’ve been gaming the system, and they’ll peg you as a “high-risk” consumer.

It’s best to have one or two active credit card accounts to earn rewards and build credit. When making your decision, consider your needs. Do you prefer cash back, or travel rewards? Do you mind a card that carries an annual fee? If you’re transferring balances from one card to another, a card with an introductory period of 0% interest can also work in your favor.

Bottom line

While rewards credit cards can help save money on items you purchase, it’s not a good idea to intentionally open and close accounts at random. Not only is it frowned upon by issuers and could result in you losing your points, but it isn’t healthy for your credit score in the long run. Instead, focus on maximizing one or two solid cards from which you can reap some consistent benefits and get your needs met.