What to do when you don’t want to pay your credit card annual fee

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Is your credit card’s annual fee coming up? Sometimes a card is packed with benefits that justify the annual fee, and other times, it can be painful! Especially if you’re not taking advantage of all the credit card has to offer. You might be wondering what your options are for avoiding the fee besides canceling the card. What can you do to save on this expense, all the while protecting your credit score? We may have some helpful suggestions for you!

Cutting Into the Perks

While everyone who earns cash back and miles by using their credit cards loves to brag about their profits, few people enjoy paying the annual fee—and most people fail to consider that this is part of the cost of earning the cash back and miles, if that is the type of card you are using. You certainly need to weigh the benefits of earning the perks against any costs associated with using the card.

For example, a card that offers a companion ticket every year, or free baggage checks, can usually pay for itself—even when you have to pay an annual fee. Just take a few minutes to read the fine print and actually calculate what it costs you. another point to consider is whether or not you pay off your balance each month—if you don’t, and you are paying interest each month, then you are pretty unlikely to come out on top when it comes to assessing the costs of having the card. You are going to be much better off with a cash back card that perhaps has fewer perks but no annual fee.

Alternatives to Canceling

1. Ask for the fee to be waived.

Usually, when people sign up for a credit card that waives the annual fee for the first year, they tend to forget about it until their anniversary comes around and the annual fee becomes due.  The first alternative that we can suggest is that you can simply ask for the fee to be waived for another year. If you have been a good customer over the first year, your chances of success with this request are going to be increased substantially.

2. Ask if there is a No-Annual-Fee version of the card

Many cards offer different versions with different benefits. If you want to keep the card open so as to not affect your credit score, see if there is a “no annual fee” variety that you can go for. Many of these cards may change the perks and the way that you can earn points or miles, and you also want to make sure that you don’t lose any of your accumulated points or miles.

The Impact on Your Credit

Canceling a credit card may have an impact on your credit score, so you want to make sure that if you cancel it, you understand how it is going to affect you overall. The reason that canceling a credit card impacts your credit score is because of your overall credit utilization, which is what about a third of your FICO score represents.

Credit utilization refers to the ratio of credit available to credit used. When you cancel a credit card, let’s say with a $5000 credit limit and $0 balance, you are suddenly affecting your credit utilization score—you will look as if you have more debt as compared with your available credit. If you tend to pay off credit cards every month, then this should not be an issue, but if you carry some debt, do your homework before pulling the plug and canceling.

Another consideration is your credit history. About 15% of your credit score is related to your credit history. Closing a card that you have a good history with could put a ding on your credit report, although, if you have good credit, this will be temporary.


Sometimes an annual fee is worth paying, and sometimes it isn’t. That’s really the bottom line here. You have to decide what you are getting out of it, and choose whether or not you want to keep the card active. Consider these important tips, and make the choice that is best for you and your credit!