Avoiding credit card annual fees

Most cards that earn signup bonus points have an annual fee. In fact, I can’t think of any reasonable good-signup card that doesn’t. But most of these cards waive the annual fee for the first year, so you’re set for 12 months. But what do you do as that 12-month mark is approaching? Here’s a guide to make sure that you never pay annual fees on your credit cards, or you only pay the ones that you absolutely must.

1. Wait 11 months

You never want to close a card right after earning the signup bonus. It looks suspicious to the credit card company, and you don’t want to damage your relationship with them because they hold the keys to the kingdom: good credit cards. If you close a card within 6 months of opening it, it’s not unheard for a credit card company to take back the points you earned.

You also don’t want to wait until the annual fee hits to do something about it. Once you’ve been charged an annual fee, credit card companies don’t have as much incentive to waive it.

So the sweet spot is 11 months after opening the card. You’ve had it nearly a year, but you also haven’t been charged an annual fee.

2. Decide if you still want this card if you had to pay the annual fee

Let’s say the credit card company isn’t willing to waive your annual fee. Would you pay it? Consider the benefits the card gets you. An airline card with an annual fee usually gets you free checked bags, which can easily cost more than the annual fee.

Also consider whether you’ll keep the points you’ve earned. With airline and hotel cards, you’re safe, those points are in your rewards account. But with a points-earning card, like Chase Sapphire, Amex Gold or Citi ThankYou Premier, you’ll lose those points if they’re not linked to another card or you don’t spend them immediately. If you have a bunch of points in your account, consider paying the annual fee to keep them or opening another card linked to that account so you can close your current one.

3. Decide what you would be willing to accept to keep the card

Unless you haven’t spent a dime on the card since you opened it, it’s likely you’ll get some sort of retention offer to keep the card. The credit card company might offer to waive your annual fee, but they also might offer you some points to keep it. How many points would you accept to keep it?

When I called to close my Citi AAdvantage Visa, Citi offered to not only waive my annual fee, but also offered to give me 1,000 bonus points every month I spent $1,000 on the card for 16 months. They only had to waive my annual fee to convince me to keep it open, but now I spend $1,000 on the card every month and earn the 1,000 bonus points. It’s awesome!

4. Call the number on the back of your card

When you reach a representative, ask them to send you to the retention department. This department is specifically equipped to provide you an offer to stay their customer if you’re trying to close your card.

Your side of the conversation should focus on the fact that you really like this card, but you can’t justify paying the annual fee on it, so you’d like to close it. They will either offer you something to stay, or they’ll say okay we can cancel it.

5. If they don’t give you a retention offer, ask to move your credit line to another card

Your credit score is made up in part by the total amount of credit line you have available. You want that number to be high, so if you’re closing a card, ask if they’d be willing to move your credit line to another card you have with them. That way your total available credit stays the same.

6. If they won’t move your credit line, ask to downgrade your card

Some credit card companies won’t be willing to move your credit lines around. If this is the case, you can ask them to switch your card to one with no annual fee. This way you can keep your credit line and number of accounts the same, but not have to worry about paying an annual fee on this account again.

When I called Chase to close my Chase Sapphire Preferred, I was able to downgrade to a regular Chase Sapphire card. This card has no annual fee and allows me to keep a good amount of credit open with Chase. It also makes me eligible to sign up for the Sapphire Preferred again in the future.

If all else fails, close your account. It’s not the worst thing in the world, I promise!

Need help thinking about your own points and credit card situation? Head on over to WenneTravel at www.wennecorp.com and we’d be happy to chat for free!