Do you lose your unredeemed rewards when you close a credit card?

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Before you cancel a credit card, it is wise to consider what will happen to any rewards you have earned, but not yet redeemed. Do you keep them indefinitely, is there a grace period to use them after you cancel a card or do you immediately forfeit all of your points? There's no singular answer that's correct for every credit card, so it's good to do a little homework to ensure you don't lose your rewards.

Below, CNBC Select explains what happens to the rewards from different types of credit cards when you cancel them and how you may be able to prevent losing your points, miles or cash-back.

First, you should know about the three major types of rewards credit cards because there's an important distinction as to what happens to your rewards when you cancel each type of card.

Cash-back credit cards

As its name suggests, cash-back credit cards earn rewards in the form of cold hard cash back. Cashback is the most versatile type of credit card reward and doesn't require you to jump through hoops to redeem.

Many of the top cash-back cards stand out for not having an annual fee yet still offering generous rewards, including the Wells Fargo Active Cash® Card, Citi Double Cash® Card and Chase Freedom Unlimited®.

Co-branded airline and hotel cards

Co-branded travel credit cards earn points or miles from specific airline or hotel loyalty programs. The points and miles are automatically transferred to the airline or hotel loyalty program associated with your credit card every time your statement closes. 

Examples of co-branded credit cards include the United Explorer Card, Citi® / AAdvantage® Platinum Select® World Elite Mastercard, World of Hyatt Chase Credit Card and the Hilton Honors American Express Surpass® Card (See rates and fees).

Flexible travel rewards cards

With flexible travel rewards credit cards, you typically earn points or miles from the bank's specific program. Rewards from these types of credit cards can be redeemed in a variety of ways. You can transfer them to airline or hotel loyalty programs, redeem them through the bank's travel portal, get cash back as direct deposit or statement credit or you can redeem for gift cards or merchandise. 

Examples of cards that earn flexible rewards include Chase Ultimate Rewards® cards, American Express Membership Rewards cards, Capital One miles cards and Citi ThankYou® Rewards cards. Some popular cards in this category include the following:

• Chase Sapphire Preferred® Card
• Chase Sapphire Reserve®
• American Express® Gold Card
• The Platinum Card® from American Express
• Capital One Venture Rewards Credit Card
• Capital One Venture X Rewards Credit Card
• Citi Premier® Card

With co-branded credit cards, the rewards are yours to keep, even after you have closed the card. They will not be clawed back as they have already been transferred to your loyalty program account. 

One thing to keep in mind is the program's expiration policy. If you need activity to keep your points from expiring and earning points from credit card spending was how you previously had activity, you'll need to find another way to keep your points active. For example, American Airlines AAdvantage miles expire after 24 months of account inactivity, but there are many ways to keep them active besides flying, such as by using the American Airlines shopping portal.

With all of the major card issuers, if you cancel a credit card that earns flexible rewards, you lose any unredeemed points or miles. However, some programs give you a grace period to redeem points even after you close your card. Here are the policies from the terms and conditions of some of the major programs.

• Chase Ultimate Rewards: You have 30 days from the date you closed your card to use your points.
• American Express Membership Rewards: You will immediately lose all of your points if you cancel your last or only Membership Rewards-earning card.
• Capital One: You lose any rewards you have not redeemed when you close your account.
• Citi ThankYou Rewards: You must use your points within 90 days after closing your account or you will forfeit the points that you earned with the closed account.

Cash-back credit cards generally don't automatically issue you a statement credit or check after earning cash back — you generally must manually request to cash out your rewards. As such, like flexible rewards, you generally need to redeem cash back rewards before closing a card so that you don't lose them.

Discover® is more generous than some other card issuers in that its cash back rewards never expire — even if you close your account. Instead, it will automatically credit your account or send you a check with your rewards balance if your account is closed or if it has not been used within 18 months. This applies to all Discover cards, including cards like the Discover it® Cash Back and Discover it® Student Cash Back.

Transfer them to partner travel programs

Your best bet is to pick an airline or hotel program that you redeem with frequently and transfer your points to them. If you don't have any upcoming travel plans and you're not sure when you'll use them, try to pick a program where the rewards don't expire.

Open a new card or move them to an existing card within the same ecosystem

Many cards earn the same type of rewards and allow you to transfer your points within that same ecosystem. For example, several Chase credit cards earn Ultimate Rewards® points, including the Chase Sapphire Reserve, Chase Sapphire Preferred® and Chase Ink Business Preferred® Credit Card. So if you have a Sapphire Preferred and an Ink Preferred, and you want to cancel the Sapphire, you can move your points over to the Ink card to keep them. 

In addition, you can combine points earned on the Chase Freedom Unlimited®, Chase Freedom Flex®, Ink Business Cash® Credit Card and Ink Business Unlimited® Credit Card with the Reserve, Preferred or Ink Preferred to unlock the ability to transfer them. So if you have a Freedom Flex and a Sapphire Preferred, and you want to cancel the Freedom Flex, move your points to the Sapphire card.

Amex, Citi and Capital One work similarly, though Capital One and Citi have fewer card options.

If you don't have another card with transfer ability, consider opening one before closing your existing card. Just keep in mind that many banks have application restrictions, such as Chase's 5/24 rule, which prevents you from getting a new card if you've had more than five new cards in the past 24 months. 

Transfer your points to someone else

Some programs allow you to share or combine points with other cardholders. For example, Chase allows you to move your points to another Chase card with Ultimate Rewards that belongs to a member of your household. In that case, you can transfer your points to that person's card before closing yours. Capital One allows you to share your miles with any other cardholders, even others outside of your household.

Redeem them for a statement credit, gift cards or merchandise

Typically redeeming your travel points for a statement credit, gift cards or merchandise is not the most ideal redemption, but it is better than letting your points go to waste. Small balances may not be worth transferring to an airline or hotel program if you don't think you'll use them. In that case, getting $25 cash back or a $25 gift card may be better.

Ask for a retention offer

If you're canceling your card because you don't think the benefits are worth paying the annual fee, you can call the issuer and ask if they have any retention offers for you. Credit card issuers sometimes have retention offers to keep customers from canceling their credit cards. 

A retention offer may require you to spend a certain amount within a specified timeframe to receive bonus points or a statement credit that covers the cost of your annual fee. Or they may just waive the annual fee without any spending requirements at all.

Pay off your balance

Since you'll still be responsible for any balance due after you close a card, it's best to cancel it with a $0 balance so you don't have to worry about making payments. If you're carrying a balance that you can't quite pay off and still want to cancel, you can consider opening a zero- or low-interest balance transfer card and moving your balance.

Use any available statement credits

Many travel rewards credit cards have annual or monthly statement credits. For example, Chase Sapphire Reserve's $300 annual travel statement credit or the $200 annual airline fee credit on The Platinum Card® from American Express. Use any credits you possibly can before closing.

Redirect any automatic payments billed to your card

If you have autopay set up for any of your monthly bills, be sure and change those bills to be paid from a different credit card. One common automatic payment is for streaming subscriptions, and it can be easy to forget to update your billing, especially if you don't frequently use the services.

In some instances, it may be the bank that initiates the closure of your credit card account. Banks can close credit cards for a multitude of reasons, including account inactivity, missed payments, bankruptcy, fraud, rewards abuse or anything they deem as being against the program's terms and conditions.

If this happens, with most cards, you typically lose your rewards immediately. The only exception is usually for inactivity closures where you may have 30 to 90 days to still redeem your points. 

When in doubt, read the terms and conditions of your credit card before proceeding to close your card. If you're proactive and take just a few steps, you can help to ensure you don't lose your rewards if you cancel a credit card.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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For rates and fees of the American Express® Gold Card, click here.

For rates and fees of The Platinum Card® from American Express, click here.

For rates and fees of Discover it® Cash Back, click here

For rates and fees of Discover it® Student Cash Back, click here.

For rates and fees of the Hilton Honors Surpass Card, click here.