One of the first things I ever learned about credit cards was that sometimes it’s possible to get the annual fee waived. And even if the company won’t waive it outright, they still may offer you something in exchange for paying the annual fee and keeping the card. And if you get no offer and/or don’t want to keep the card, there’s still an important option to consider before canceling the card and closing that account.
Getting an incentive to keep the card
The first thing you should do once your annual fee hits your statement is call the number on the back of the card and ask if they have any available incentives for you to keep the card. These are also known as “retention offers”. I won’t tell you to lie, but it obviously helps if, and may even be necessary for, you to tell them you’re thinking about canceling in order to be given a retention offer.
There are too many cards for me to list all the known retention offers here. So, if you want to familiarize yourself with some of the most recent offers given, the Flyer Talk forum has dedicated retention offer posts for most credit cards out there. To find them easily, just Google the name of your credit card along with “retention offers flyertalk”.
To give you one example, I called American Express about a week after my Platinum’s annual fee was charged to my statement. I let them know I was a little iffy about paying the $450 (at the time) annual fee again. After some formalities including going through all the benefits with me to ensure I knew what I was getting in exchange for paying the annual fee, they offered an incentive of 25,000 points after spending $3,000 within 3 months in order to keep the card open.
How much time do I have to call?
While every company has their own individual policies, the rule of thumb is that you usually need to call within 30 days of the annual fee hitting your statement. The current policies for the big three are:
American Express: You have 30 days from the date your annual fee is billed to call and request a refund. You will NOT receive a refund if you are past 30 days.*
Chase: You have 30 days from the date your annual fee is billed to call and request a refund. You will NOT receive a refund if you are past 30 days.*
Citi: You have 30 days from the date you are billed to call and request a refund. Any requests past 30 days will receive a pro-rated refund.
* If you are a Massachusetts resident, I have seen datapoints regarding a state law that requires credit card card annual fees to always be refundable on a pro-rated basis.
Do they waive fees or give offers to everyone?
Definitely not everyone. If you’ve put constant, heavy use on the card, of course they’ll lean towards trying harder to keep you. On the other hand, if you just spent enough to earn the sign-up bonus, then threw the card in your sock drawer for the rest of the year, there’s a good chance they’ll tell you not to let the door hit you on the way out. Most people are somewhere in the middle, so the best thing to do is just to call in and try.
If you don’t get an offer that you like (or one at all), then you can either pay the fee or get rid of the card. Getting rid of the card is best done with a product change, if possible, with canceling the card outright as a last resort.
What is a product change?
This is the important option I mentioned earlier. A product change, or downgrade, is often the best alternative to canceling a credit card. Downgrading to a no-annual fee card allows your line of credit to stay open. Why is this good? Because one of the five major factors involved in calculating your credit score is the longevity of your credit or average age of accounts (AAoA). The longer you’ve had your accounts open, the better. Canceling a card will bring down your overall AAoA, potentially hurting your credit score.
If you end up deciding that your card is not worth keeping, ask the representative if there is a no-annual fee option that you can downgrade to. Many, though not all, cards have them. It’s possible that your only downgrade option will be a card with a lower annual fee. Like with retention offers, your best bet for researching this before hand is to Google the name of your credit card along with “product change options”.
When is the best time to call?
Some companies require the fee to actually be charged before they can look into retention offers. As the rule of thumb is that your annual fee will be completely refundable within the first 30 days of it posting to your account, it can’t hurt to just wait until your fee hits before calling in. Just don’t wait until the last minute to avoid any complication.
As an example, I waited until the last minute before calling in about an annual fee, not considering that my autopay had already gone through for that statement. I had the fee refunded, but since I had already paid it, the refund came in the form of a statement credit. I had to wait for the credit to show up, then call back to request that the credit be issued back to my bank.
Know what you’re losing
Keep in mind that canceling or downgrading a card means you will lose most, if not all, of the benefits of the original card. Be sure you ask the representative (or research on your own beforehand) what will happen to your hard-earned points when downgrading or canceling. If you don’t downgrade to or have another card that accumulates those points, you may be at risk of losing them immediately or after a short window of time.
You may also lose benefits such as the ability to transfer your points to travel partners, use points at a bonus rate, get trip delay and cancellation insurance, airport lounge access, and more.
*Pro-tip: Any hotel points or frequent flyer miles that you have earned through a credit card or bank account bonus or from points transfers will not go anywhere regardless of what you do with the credit card.
It never hurts to try
You may end up not getting a retention offer and there may be no good option for downgrading your card. If you have to cancel, then cancel. If you’ve taken care of your credit, it surely won’t be the end of the world. Good luck with your retention offers and feel free to contact me with any questions.