I was so happy to hear from a blog reader named Maria. She recently emailed me to ask about paying the annual fees on credit cards. Here’s what she was wondering.
I’ve had a credit card for almost a year and soon I’ll be charged the annual fee. Should I pay it? Can I get the bank to waive the fee again?
Sign-up bonuses on travel rewards credit cards are a key component to accumulating a lot of miles and points for travel in a short amount of time. Many of these cards come with annual fees, some as cheap as $49 and some as expensive as $450! As part of the sign-up bonus, banks oftentimes waive the annual fee for the first year.
For miles and points enthusiasts, like Maria, it’s necessary to reevaluate award credit cards and determine whether or not paying an annual fee is worth it. After doing so, some cards will be worth keeping and others not worth the fee.
When should I pay the annual fee?
You might consider paying the annual fee if the credit card benefits outweigh the cost of an annual fee.
For example, the Chase Hyatt credit card waives the annual fee the first year but costs $75 thereafter. However, this card includes a free night certificate at any category 1-4 Hyatt property every year after renewing the credit card.
The 1-night certificate should be used in a category 4 hotel to gain the highest possible value. There are many Grand Hyatt and Hyatt Regency properties located in expensive cities across Europe, North America, and Asia that regularly book for $200-$400 a night! Paying the $75 annual fee on the card is a no-brainer when you make good use of the free night certificate.
You might consider paying the annual fee if the credit card is part of your long-term miles and points earning strategy.
I’m a huge fan of the Chase Sapphire Preferred Card. Earning Chase Ultimate Rewards points is a large piece of how I go about earning award flights. I use the Chase Sapphire internationally because it has no transaction fees.
It also gives me 2x the points on travel and saves me money on car rentals by offering primary car rental insurance. The benefits of the card and the value of the points I’m earning makes paying the annual fee more than worth it.
Can I get the bank to waive the fee again?
If you’re a good customer who is regularly using the card and paying your bill in full and on time, the bank will not want to lose you as a customer.
You might consider calling the bank and politely explaining you’d like to cancel the card because you don’t feel paying the high annual fee is worth it for you. I’ve had annual fees waived simply for being a good customer and asking politely!
The bank may offer you a miles or points bonus instead, in exchange for you paying the annual fee. In this case, it’s important to calculate the value of the bonus and compare it with the cost of the annual fee to see whether or not it’s a good deal.
Banks have even offered me both of the above situations at the same time! I recently called a bank about a credit card and its annual fee. Not only did the agent waive the annual fee, but also gave me an incentive to use the card by offering 5k bonus American Airlines miles for spending $1k within 90 days. This was a win-win proposition! I will keep the card and reassess next year.
In addition, by keeping the card open another year, I add to the length of time my account has been open, which will only benefit my credit score in the long run.
It’s important to remember the potential power of calling back. If the agent I spoke with initially had not been helpful. I was prepared to call back and speak with a different agent to see if I could get the annual fee waived.
What if the bank will not waive the fee or offer a retention bonus?
Sometimes banks are unwilling to waive the annual fee or offer a retention bonus.
In this case, you should ask the bank to downgrade the card to one with no fee. Downgrading a card is a better option than canceling a card because it preserves the line of credit and allows you to continue adding to the age of your accounts.
If the bank is uncooperative in all of these scenarios, you might consider canceling the card. Before taking this step, it’s important to consider any flexible/transferable miles or points currently in your account. If you cancel the card, you’ll likely lose any miles or points you have on that credit card.
Some banks, like American Express, only allow you a particular card’s welcome bonus once. Be sure the credit card is worth canceling because you may not be able to get the welcome offer on that card again.
If you have another credit card with the same bank, ask the phone representative to move the line of credit on the card you’re closing to another one of your cards with that bank. Not only is this helpful for keeping your debt to credit ratio stable, but it could also be useful for future applications.
For example, if a bank is concerned about extending too much credit to you for a new card, some of your current line(s) of credit could be reallocated to fund that new card. In this case, the bank wouldn’t be extending you any more credit than you already had available.
Also, remember, if you’re planning to apply for new credit cards, you should do this before you cancel any card. When you close cards, your credit score will go down temporarily because the overall age of your accounts usually gets younger.
Thanks again Maria for reaching out and Good Luck!
Have you gotten a bank to waive the annual fee on one of your credit cards? What worked for you?
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