Earning miles and points from your credit card is fun—especially when the annual fee is waived for the first year. Once that anniversary comes around, however, you may be required to pay an annual fee—which might not be what you planned. Since you have earned tons of points, you don’t want to simply cancel the card. Let’s talk a little bit about your options and what might be available to you.
Consider the Retention Bonus
Many of the bigger credit card companies will offer you a special “retention bonus” on your anniversary date. This can range from a tidy sum of extra bonus points to a free baggage check, to a free night in a hotel, and more. Often the value of the retention bonus is far greater than the cost of the annual fee—so consider this part carefully when you are thinking of canceling the card. It might be well worth it to keep the card. While there are some cards that have pretty hefty annual fees, taking a look at what you get is a wise move. See if it is worth it to keep.
Consider the Credit Impact
Closing a credit card can negatively affect your credit score, so consider this move carefully. Now, this doesn’t mean that you should automatically keep a card with an expensive annual fee just because you don’t want a short-term ding on your credit. But, you should not be opening and closing credit cards on a whim if you want your credit to stay clear and clean.
Take an inventory of all of the cards you have and consider the fees and benefits. Also, consider your history with them and your available credit. Then, and only then, should you determine whether or not to close a card when your annual fee is up. Don’t rush to close a card simply because the fee is due.
Make Your Plea
You may not realize this, but you can actually request that the fee is waived for another year. Keep in mind that if you are a good customer, the credit card company will not want to lose your business. They may agree to waive the fee for another year. Sure, that will put you in the same position next year, but that gives you time.
Ask for a Downgrade
Many credit cards offer no-fee versions of their more expensive cards. The perks are fewer, but you don’t have to close the card and take the hit on your credit score. If you have a good history with the credit card, consider this option. When you can keep the line of credit open for free, and not have a hit on your credit card, this is really a win-win.
You will hear about loopholes and how you can exploit the system by getting a retention bonus just before the anniversary and canceling. Alternatively, you can pay the annual fee for a huge retention bonus and then cancel and keep the bonus. But the reality is, many of the best credit cards out there will offer you some sort of incentive to stay.
Whether you get a companion certificate, bonus points, or something else, it is up to you to determine if that is worth it for you to stay. Don’t impulsively cancel a credit card. You may regret it when it hits your credit score. As with any decision related to your credit, be careful and do your homework to figure out what is going to be the best decision for your personal situation. Often you won’t be able to reapply for a card once you cancel, so make sure it’s really what you want to do!