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I open A LOT of credit cards. I open most of them for the lucrative sign-up bonuses, and then I put minimal spending on them afterward. However, the real decision point comes a year later when the annual fee is assessed: do you keep the card and pay the annual fee, or do you cancel the card altogether?
I’m a big fan of paying those annual fees in exchange for tens of thousands of credit card points… but not so much if there aren’t other benefits. Some cards offer category spending bonuses, such as 4x on dining or grocery store spending, 3x on travel, or 1.5x on all spending. Other cards offer specific spending credits, like an annual $300 travel credit, airline fee credits, or TSA PreCheck reimbursement. Everybody has a different perception of how valuable each of those benefits is to them. So the quick answer to the “keep or cancel” question? It depends.
Case in point: the $95 annual fee recently posted for my Citi ThankYou Premier credit card, so I had to evaluate my options.
- Keep: I could pay the annual fee and keep the card for another year. The Citi Premier card offers a few spending category bonuses (3x travel including gas and 2x dining and entertainment). However, the Chase Sapphire Reserve card gives me 3x on all travel and dining expenses, and Taryn’s AMEX Gold card even gives 4x on dining. So the category bonuses aren’t compelling enough for me to pay the annual fee given that we’re better off putting our dining and travel spending on different credit cards.
- Cancel: Simply cancel the card to avoid paying the annual fee. There’s no long-term harm in canceling the card. Depending on your circumstances, your credit score may take a temporary small hit. By canceling the card, you are effectively decreasing the total amount of credit available to you, which impacts credit utilization. In my case, I’d rather not cancel the card because I’ve had the Citi Premier card now since December 2015. It was literally one of my first credit cards when I started collecting points for our around-the-world trip. The average age of your credit accounts also impacts your credit score, and since this is now one of my oldest cards, it would be more detrimental for me to cancel it. So if I can avoid it, I’d prefer not to just cancel the card.
- Downgrade: Rather than paying the annual fee or canceling the card outright, I could instead ask for the card to be downgraded to a version of the card without an annual fee. This doesn’t work for ALL credit cards, but since Citi offers many no-fee cards, this is another option on the table. In my case, the advantage would be that downgrading the card would technically keep my original line of credit intact. This means that the credit bureaus would view the no annual fee card as the same as the original credit card, keeping my “account opened” date as December 2015. It’s the best of both worlds: I avoid the annual fee while also keeping one of my oldest credit cards.
- Request that the bank waives the annual fee: And finally the best option. Some banks will offer to waive the annual fee completely if you ask them nicely. If you’ve been a long-time customer or spend a lot of money on the card, they might do it as a courtesy. Most of the time, the bank will ask that you spend a certain amount of money on the card within a specific timeframe (ex: $5000 in spending on the card within three months) in exchange for waiving the fee. Generally, this waiver request only applies to the midrange credit cards with annual fees of $100 or less. I’m pretty sure AMEX would laugh you off the phone if you asked them to waive the $550 annual fee on your AMEX Platinum card.
The only reason I still have the Citi Premier card is because Citi has ALWAYS offered to waive my annual fee. And this year is no different.
I called Citi and told them I was considering closing the card. Then I asked if they would be willing to entice me with any sort of retention offer. After being transferred to the “retention specialist,” I was offered a statement credit of $95 and 1,000 Citi ThankYou points if I spent $1,000/month in three consecutive months (January 7 – April 7). Maybe I could have pushed for a better offer, but ultimately I was happy to have found a way to avoid the annual fee for my fourth year in a row, especially since I hardly put any spending on the card in 2019. Citi has been generous with their waiver requests, and it’s probably because they are very much playing catch-up to Chase, AMEX, and now Capital One in the credit card game.
Another reason I wanted to keep the Citi Premier card open is that closing the card would affect my ability to qualify for the Citi ThankYou Prestige credit card. Credit card companies have all sorts of rules (most notorious among them the Chase 5/24 rule), and Citi doesn’t let you earn a sign-up bonus on a ThankYou points credit card if you have opened or closed one of their ThankYou cards within the last 18 months. So closing my current ThankYou Premier card would have prevented me from applying for the ThankYou Prestige card for the next 18 months. And given the Chase Sapphire Reserve’s recent annual fee increase to $550/year, I’m begrudgingly considering whether I switch teams to Citi later this year.
So no, I don’t pay hundreds of dollars in superfluous annual fees. And no, I don’t cancel every card after earning the sign-up bonus. It’s always a case-by-case decision depending on what the card offers and how it might fit in my credit card portfolio.