As a Travel Hacker, it’s inevitable that some of the travel credit cards in your wallet will require payment of an annual fee. While some credit cards issuers waive the fee in the first year, the annual fees on many great travel credit cards range from $95 to $550. You may be thinking that there’s no way you would want to pay annual fees. If you’re like me, you have a lot of travel credit cards. It’s not a black or white issue. Let’s look at ways to answer the question; Is it worth paying annual fees on credit cards?
First, it’s important to look at the perks of each credit card and how those perks fit into your travel goals. Some cards like the Chase Sapphire Preferred and the Capital One Venture credit card to name just two, do not charge foreign transaction fees. If your travel plans include international travel, having a card that doesn’t charge foreign transaction fees is a must. If you value Chase Ultimate Rewards Points, you’re going to want to keep at least one Chase card that earns those points in your wallet at all times. The same goes for Citibank Thank You Points and American Express Membership Rewards Points.
Hotel Credit Card Perks
Now consider hotel credit cards. Many, like Marriott and Hyatt, offer a free night’s stay certificate annually which you can often use on any category within the hotel brand. That one night certificate can be worth $250-$450 and sometimes even more! If the annual fee on that card is only $75 or $95 dollars, you bet I’ll gladly pay the annual fee to have that perk.
In the case of airline credit cards, sometimes, there’s a bonus of airline points/miles every year on the cardholder anniversary. Southwest has several cards that currently offer at least 6,000 Rapid Rewards Points on each anniversary. I tend to get a value of about 1.6 cents per point when redeeming Southwest Rapid Rewards points so that 6,000 point bonus is worth around $95. Again, I’ll gladly pay a $95 annual fee since it’s offset by the bonus points I’ll receive each year.
Other credit card perks include but are certainly not limited to: free access to airport lounges (both airline and others like Priority Pass and American Express Centurion lounges). Another perk is reimbursement for TSA Pre-Check and or Global Entry (usually up to $100). How about a status increase that brings you extra benefits like seat upgrades on airlines or access to concierge level and upgraded rooms and more at hotels? As well, some credit cards offer reimbursement for travel related expenses which can range from $100-$300. Consider all of a credit card’s benefits when evaluating whether or not to keep the card.
Your travel credit card will likely offer car rental supplemental insurance. Another perk is purchase protection or warranty extension on your purchases made with the credit card. Rotating bonus categories that offer additional points for purchases. This is a great perk because it helps you earn more valuable points for purchases you are already making.
One Outlier Perk
This perk is rather unusual: The American Express Platinum card has a unique perk. Currently get up to a $100 statement credit towards purchases made at Saks Fifth Avenue. It shows you how far the credit card companies will go to make its customers happy.
Still Not Sure
But what if there’s no clear cut perk or incentive to make it worth paying the annual fee on a credit card? There are a few things you can try before canceling the card outright. First, call the credit card company and clearly explain that you are thinking of canceling the credit card due to not wanting to pay the annual fee. Sometimes, they will offer to waive the fee for another year. Yes, it happens regularly but not with every bank and credit card. In that case, keep the card open. You can reassess next year.
If they don’t offer to waive the annual fee, you may be offered a “retention offer”. In this case, you will be offered a set amount of points or miles if you spend “x” amount within “x” amount of days. I had this happen with an American Airlines credit card.
I valued the bonus miles at $20 less than the annual fee but figured that the credit card perk of free checked bags was more valuable than $20 as one bag usually costs a minimum of $25. Plus, I wound up with 7,500 more miles in my account after a $1,000 spend in 90 days.
If the customer service representative doesn’t offer a retention offer, hang up and call again. Different representatives will offer different incentives for you to keep the credit card open. When you call back, you can also ask to be transferred to a “retention specialist” who is empowered to make you an offer in order to retain you as a credit card holder.
The Downgrade Option
If the above strategies still leave you with a card you’re not interested in keeping, call and ask to “downgrade” to a no fee credit card. Most banks will have a credit card available that never charges an annual fee. You may give up some perks, but the benefit in downgrading is that you preserve the line of credit connected with the card. I have downgraded to no-fee cards and I use the card once or twice a year just to keep it active. The rest of the year, it stays out of my wallet. Always try this option before canceling the card.
Finally, if you are sure you want to cancel the card, make sure it’s not your oldest credit card. Always, always, always (I can’t stress this enough) keep your oldest credit card open. Even if it means paying a fee. This is because the age of your credit is a critical part of your credit score.
Still Want to Cancel?
If you’re absolutely sure you want to cancel, ask if you can transfer the line of credit to another card with the same bank (if you carry other credit cards from the particular bank). This preserves your outstanding credit and credit utilization ratio. Both of these are key factors that male up your credit score. You can read more about what goes into your credit score on this post: Your Credit Report
The bottom line is that there will be times that it’s worth paying annual fees on credit cards. Sometimes, you won’t feel it’s worth it. It depends on how you value the perks and benefits of each credit card and your travel goals. Before canceling any credit card, assess all of the benefits of keeping the card open. Then, try the strategies outlined here first.
Have you ever gotten a bank to waive the annual fee or offer you an incentive to keep your credit card open? Did you wind up paying annual fees on credit cards without an incentive? Please scroll down and leave a comment below.