That Pesky Credit Card Annual Fee: Ask Nicely, and You May Be Rewarded.


Used wisely, credit cards – with their generous signup bonuses – are a practically magical way to boost your mileage/point balance.   Sign up for a few well chosen cards, and you could be jetting to your dream destination sooner than you thought possible.

When I tell friends about this, I generally get two immediate questions.  First:  Doesn’t that ruin your credit rating?!?  A logical, but incorrect assumption.  I’ll cover that in a later post.

The second question, and the subject of this post is:  But what about all those annual fees?   A fair question, and a valid concern.   If you have to pay hundreds of dollars in annual fees for premium credit cards, then the value of the travel rewards is greatly diminished.

The good news is that for many of the most popular travel rewards cards, the issuing bank waives the annual fee for the first year.   So, in most cases, you can sign up for a card, get a sign up bonus of 30,000 to 50,000 miles (sometimes more), and not have to worry about an annual fee for a full year.   In that time, you can use the miles and then decide later whether its worth it to you to pay the fee to keep the card.  (sometimes it is, if the cost/benefit ratio works out in your favor.  More on that is a future post.)

And more good news is that in many cases, if you ask nicely, you can get the annual fee waived the second year — or get a statement credit or some other reward that will make it worth keeping your card for another year.

The Magic of the Retention Bonus

The credit card companies like you and don’t want to lose your business.  So, some of them (not all) will give you “gifts” for staying with them.  The “gift” can be a waiver of the fee, or a statement credit, or extra bonus miles.  You just need to find out what the offer is, and then decide whether it’s worth it to you.

Also, if you do a search on Flyertalk, you can usually find out in advance with the current retention offers are.   Remember, like so much in this hobby, “Your Mileage May Vary” (YMMV), but it only takes a few minutes to see what the options are.

 My Most Recent Example
I have an Citibank American Airlines Platinum Visa card that I’ve had about 5 years.  The $95 annual fee will be due in September.  I like the card, but I really don’t need it, because I now have  2 other Citi AA cards.  But I was interested in keeping the old Visa open, since it’s one of my older points earning card, and having older cards helps a little with the credit score.  So figured I’d  call to cancel to see what kind of retention offer I got.  And, it worked out nicely.    Here’s what I got:
City wouldn’t waive the $95 fee — but they essentially made it free because they will give a $95 statement credit if I purchase at least $95 on the card in the next two months.
Then, I can get up to 16,000 bonus miles.   For each month that I spend $1000 on the card, they will give me an extra 1000 miles – for the next 16 months.  So that means if I have the potential of earning 2 miles per dollar, which is a great deal.
How To Get the Retention Offer
As I said, I usually first check Flyertalk, so that I know what the current best offers are.  (And in some cases, there are numerous reports that a company is not making any offers – and then I don’t waste my time)
Call the customer service number of the back of the card, and politely tell the rep that you are calling to close the account.  Politely and cheerfully explain that you like the card and the service, but can’t justify paying the annual fee.  In most cases, the person will then send you to a “retention specialist.”   Go through the same routine with that person – Yes, you like the card, and the service, but you don’t want to pay the annual fee.  At that point, the retention specialist usually will tell you what a great customer you are, and how much they want you to stay with them, and he is authorized to make a special offer just to you, since you are so special.  You find out what the offer is.  You can say yes, or no, or I’ll think about it, or “do you have anything better?”    Take the offer if you like, or think about it if you don’t like it.
In my experience, I usually get some kind of offer to keep the card the second year.   It’s harder to get a retention offer the third year – especially if its on a card that I haven’t spent anything on (which is common).   The success rate for getting retention offers varies depending on the bank, the card, how often you have used it, and who knows what else.
The key lesson is — you don’t necessarily have to drop a card just because the fee is coming due.

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