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My credit card annual fee posted – should I cancel it? I get this question ALL THE TIME! This scenario will inevitably pop up once you’ve been in the points game for a year or more. We generally sign up for new cards to earn the sign up bonus. After that, depending on the ongoing value and benefits, we will have a decision to make when the annual fee comes due. Most people assume that paying the fee or cancelling the card are the only two options. Fortunately, you have more options than you may realize…
Loophole Travel reader Justin S. recently reached out to ask:
“The annual fee on my Chase Sapphire Preferred card just posted. I’ve already used the points. Should I just cancel it?”
This is a very common question, because most people don’t want to pay $95-$450 for a card that is usually sitting in their sock drawer. While it seems like a simple decision to cancel the card and get a refund for the annual fee, the decision isn’t quite that straightforward. You actually have four options at this point: keep, cancel, request a fee waiver, request a product change. I’ll go through these four options and discuss the considerations for each one.
Keep the Card
When your fee shows up, you may want to simply pay it and keep the card. There are a few reasons to keep a card open:
- You have not used the points yet – If you still have points from the sign up bonus in your account, you may lose them if you cancel the card. For example, if you only have one card that earns Amex Membership Rewards (MR) and you cancel it, you will forfeit all remaining MR points in your account. Citi Thankyou points will start a countdown to expiration as well.
- Keep ongoing benefits – You will get certain benefits simply for having a card open. For example, some cards grant free checked bags, status, lounge access, or an annual free night. Depending on the value you get from these benefits, it may be worth paying the fee.
- Referral bonuses – Some credit cards offer bonus points when you refer your friends. For example, Chase offers 10,000 points when you refer a friend who signs up for the card. These points are worth $100 cash or more toward travel. If you plan on referring at least one person in the next 12 months, you will come out ahead on the $95 fee.
- Maintain point flexibility (Chase) – If you cancel or downgrade a Chase card, and you no longer have a premium option (card with an annual fee), you will lose the ability to transfer your points to airlines/hotels.
Brooke and I generally do not like to pay annual fees on our cards. However, we have kept a few cards open and paid the fee:
- Chase Sapphire Reserve ($450) – $300 travel credit, lounge access, and 1.5CPP travel redemption, ability to transfer points for travel.
- Chase IHG ($49) – Annual Free Night Globally
- Chase Sapphire Preferred ($95) – Referrals
- Amex SPG Personal ($95) – Referrals
- Amex SPG Business ($95) – Referrals and Sheraton Lounge access
- Chase Southwest Premier ($99) – Referrals and 6,000 Bonus Points
- Chase Southwest Plus ($69) – Referrals and 3,000 Bonus Points
Request a Fee Waiver
When your annual fee shows up, you have the opportunity to call the bank and request a waiver of the annual fee. Simply call the number on the back of the card. Once you reach an agent, tell them that you’re thinking of cancelling the card, but you would consider keeping it if they waive the fee.
At this point, the agent will likely check their options and do one of three things: waive the fee, offer some points, or deny the request. These are called “retention offers,” and they are actually quite common. You will have the best chance to receive a retention offer if you’ve put significant spending on the card, but it never hurts to ask.
If you’re offered points, you should have an idea of how many points you would be willing to accept to pay the fee. If you don’t get the response you were hoping for, I suggest hanging up and calling again. Different reps may respond differently to your request. If you are ultimately denied the retention offer, you can choose between the other options.
Request a Product Change
Banks offer various “levels” of credit cards. The premium cards come with higher sign-up bonuses and a better benefits package, but they have an annual fee. The lower-level cards may have less impressive benefits, but they also have no annual fee. If you are unable to obtain a retention offer, you may want to request a product change.
Let’s use Justin’s example above as an example. If he calls and is not granted a fee waiver for his Chase Sapphire Preferred, he should request a product change. Chase offers the following no-fee personal cards in the “Ultimate Rewards Family.”
- Chase Freedom – 1 point per dollar on every purchase, 5 points per dollar in rotating categories
- Chase Freedom Unlimited – 1.5 points per dollar on every purchase
- Chase Sapphire (may no longer be available)
He could request a downgrade to either of these cards, and Chase would refund his $95 annual fee from the Sapphire Preferred. His account will remain open and continue to benefit his credit score. He will also have the opportunity to earn additional points/cash back with his new card. For some people over 5/24, this may be their only opportunity to get a Chase Freedom card.
He must consider that his Ultimate Rewards points will only be transferable to travel partners if he (or his wife – spouses can pool points) still has a premium card open. If they no longer have a premium card, the points can only be redeemed for cash back at a rate of 1 cent per point.
Brooke and I have downgraded the following cards in the past for an annual fee waiver:
- Chase Sapphire Preferred -> Chase Freedom
- Chase Ink Plus -> Chase Ink Cash
- Citi AA Platinum -> Citi Dividend
- Citi AA Platinum -> Citi Double Cash
- Amex HHonors Surpass -> Amex HHonors
Cancel the Card
If you have absolutely no use for the card, the benefits do not have sufficient value for you, the bank refuses to waive the fee, and there is not a no-fee option for product change, feel free to cancel. If you’re within 30 days from when the fee posted, you will get a refund. Bear in mind that your account will stop aging, and this will impact the “average age of account” in your credit score.
If you’re closing an Amex MR card, be sure that you’ve already used/transferred your points, or that you have another MR card open… otherwise, your points will be gone! The Amex Everday card is a no-fee MR card – great for keeping your balance alive.
Cancelling your card is usually not the best choice.
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