How to Avoid Annual Credit Card Fees

Rewards cards generally have an annual fee of between $60 and $125 a year. Many cards waive the fee in your first year as a customer, but then charge you the full fee after one year has elapsed. A significant percentage of the population will forget about the fee after 1 year and will simply pay it.

Credit card companies are already making 1-3% on each of your purchases in fees from retailers. Annual fees are icing on credit card companies’ revenue cake.  Obtaining a new credit card customer can cost anywhere from $80-200. Credit card customers are therefore extremely flexible when it comes to annual fees as they do not rely on them to make money and the cost of getting a new customer is so high. You can use credit card companies to your advantage to waive or avoid an annual fee.

Irrespective of what strategy you pursue, you should keep a spreadsheet with the date you signed up for a card, the annual fee, and what if anything you receive for retaining the card.

Strategy 1 – Close the card

In the week before you are due to pay an annual fee, call the credit card company and close the card. This will allow you to save the annual fee, but it can slightly damage your credit. Roughly 15% of your score is based on the length of your outstanding credit. Closing a card will reduce the average age of your credit outstanding. In addition, closing a card will increase your total credit utilization, which accounts for 30% of your score. The effects on your score in both case are generally negligible and temporary. If you use this strategy try to avoid closing multiple cards at once as this could result in a greater drop in your score.

Strategy 2 – Complain

Good things come to those who complain. Credit card companies will often wave the annual fee or give you a statement credit, but only if you complain. They will never voluntarily waive the fee. You must call the credit card company and threaten to cancel your card unless they waive the fee. Ask to speak with a manager if the first representative you speak with will not play ball. In my experience card companies will either waive the fee or not waive it.  If they will not waive the fee, ask them if they can provide you with reward points to make up for the fee. In certain instances where there are multiple versions of a card, such as the Chase Southwest card, you can ask for the bonus that is applicable to the most premium card in the category.

Strategy 3 – Pay the fee

In certain instances it may make sense to retain a card, if the value of the points or rewards you receive greatly exceed the fee. For example the Chase Marriot card gives you a stay at a category 1-5 hotel that is worth up to $150 for an annual fee of $85.

My Results

You may be thinking to yourself, ” well this is all well and good, but how likely is it that I can actually get the fee waived.” I have been successful in 3 out of my 4 attempts at getting annual fee’s waived.

Chase United MileagePlus Explorer Card

  • I was able to call the company and get a statement credit that was worth $100, more than making up for the $85 annual fee.

Chase Southwest Card

  • The company balked at waiving the $69 fee, but doubled my bonus to the premiere card member’s level. I received 6,000 points worth about $100, thereby more than making up for the annual fee.

Chase Sapphire Preferred

  • Despite my threat to cancel, Chase would not waive the fee.

Citi Signature American Airlines Visa

  • The second I mentioned that I wanted to cancel the card, the customer service representative immediately offered to waive the fee.

Comments

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3 Comments

  1. JohnG says:

    Just closed a USAirways Mastercard. They would not waive the annual fee, had only minimal options to offset the cost. Disappointing.

  2. [...] annual fee. For more information on credit card fees and strategies for avoiding them, check out this piece on Finance For [...]

  3. [...] annual fee. For more information on credit card fees and strategies for avoiding them, check out this piece on Finance For [...]

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