Do This: Avoid Credit Card Annual Fees

When applying for my first credit card fifteen years ago, my only requirement was no annual fee.  If I remember correctly, I got a free Boston Celtics t-shirt for applying for this no fee, no frills card.*

Since then, I've learned to use credit cards to stretch my spending and reap valuable sign-up bonuses and other rewards.  Yes, rewards even more valuable than a Celtics t-shirt.    However, I've also learned that, most often, the best credit cards come with annual fees.  

Typically ranging from $65 (Starwood Amex) to $450 (Platinum American Express), credit card annual fees can make a significant dent in your wallet and negate a card's benefits.  That being said, they can also be worth it if the provided benefits are valued more than the annual fee.

Regardless, I hate paying annual fees on my credit cards.  Therefore, I always try to have them waived and I advise you to do the same.  A quick phone call to a credit card issuer with a request to cancel a card (or a complete bluff) will often save you the cost of an annual fee.

My Advice Regarding Credit Card Annual Fees
In the event you have a credit card with an annual fee, you should always call your issuer (American Express, Chase, etc.) to "cancel" your card right before or immediately after the annual fee comes due.  Even if you want to keep the card, call and bluff.  Often (although your results may vary) credit card companies will offer to waive or lower the annual fee or provide you an opportunity to earn bonus points in order to keep your business.

If your credit card issuer will not make you an annual fee offer, you still have options.  These include:

  1. The issuer may allow you to switch your line of credit to another one of their no-annual fee cards.  I've taken advantage of this many times, as I want to keep my available credit high for my credit report.  Even if I have no plans to use the new card, this is usually my option.
  2. Keep the card if you think the card's benefits outweigh the annual fee's expense.  I'm not telling you to cancel or downgrade all cards with an annual fee.  I usually have at least two cards that I'm paying an annual fee on because, in these cases, the card benefits are worth it.
  3. Follow through and cancel the card.  However, before you do this, try calling back a couple times to try your luck with different representatives.  Also, if you have another credit card with the issuer, ask to transfer your available credit to your other card before closing the account.  Closing your card will affect your credit score.  Consider how this decision will affect your credit rating, especially if you plan to refinance a mortgage, apply for a new loan, etc.
My Experience 
Whenever one of my credit cards with an annual fee comes due, I always try and get out of the annual fee...even when I fully plan to keep the card.  Here's a snapshot of my experience with some cards, all of which had annual fees that were waived for the first year as part of the original sign-up offer.
  • Marriott Rewards Premier with Chase ($85):  I've had this card for years and paid the annual fee many times before learning this tip.  Last year, upon my call, they gave me an offer of 10,000 bonus Marriott points if I spent $1,000 in three months.  Sold.  This year, they gave me a night certificate for a Category 1-4 hotel if I charged $1,000 in three months.  Sold again.  Even without these retention offers, this card offers one free night at a Category 1-5 Marriott on each account anniversary, so this is a case where the card benefits outweigh the annual fee.
  • Starwood with American Express ($65 annual fee): When my first year with the waived annual fee passed, they gave me a $40 statement credit.  The following year, AmEx would not offer me a statement credit or similar enticement, but they gave me the option to transfer my account to one of their products without an annual fee.
  • Every Citi Credit Card I've Ever Had ($ varies): I've essentially had the same experience with every one of my Citi credit cards.  The first year I call, they waive the annual fee for another year.  The second year, they don't budge and I downgrade to a card without an annual fee.  However, this year, I got Citi to waive the annual fee on my AAdvantage Visa for a second year in a row.  My call and reason for cancelling (confusion regarding proposed merger with US Airways) bought me a third, annual fee-free year.
  • United Signature with Chase ($95): This card was replaced about a year and a half ago by the new United MileagePlus Explorer, but it was one of my greatest success stories.  When I called to cancel, they not only gave me a $100 statement credit (keep in mind the annual fee was only $95), but I also still received the 10,000 annual bonus miles.  Cha-ching!  The following year, they offered me nothing and I cancelled it to make room for a different Chase card.
  • Chase Sapphire Preferred ($95): After my first year, I called Chase with a complete bluff because this is one of my favorite cards and there was no way I was going to cancel it.  My bluff was called, and I kept the card.  Speaking with friends, it seems Chase will not make any annual fee deals with this card. 
  • Be friendly and pleasant on the phone.  Ask how their day is going.  Most often, your first customer service representative will pass you on to a specialist to "close the account."  However, those specialists want you to keep your card open.  Engage them in conversation.  Listen.  And if all else fails, openly ask if they have any customer retention options.
  • As I mentioned earlier: If your first call is unsuccessful, wait a day and try again.
* For the record, t-shirt enticements no longer work on me.

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