Strategies to Clean Up Your Wallet
Strategies to Clean Up Your Wallet
Annual fees can add up pretty quickly if you don’t monitor them. Before making any decisions, it is important to know what your options are when an annual fee hits your account.
1. Do Nothing. Pay the annual fee, keep the card, and carry on.
2. Downgrade. Many card issuers have cheaper/free versions that you can convert your card into. This allows you to keep the same line of credit open, which is good for your credit score (your debt-to-credit ratio does not drop because you don’t lose the
available credit, and your longevity remains intact). Plus, you can potentially get new perks from the downgraded option without having to apply for a new card.
3. Retention Offer. This is probably our favorite option. The credit card companies don’t want to lose your business, so they might give you an offer of points or cash to offset the annual fee in exchange for keeping the account open.
4. Cancel. This is our least favorite option. Sometimes it makes sense, but if you can either downgrade or get a worthwhile retention offer, then it is typically best not to cancel the card.
There are several nuances to the rules. All banks handle their cards differently, but the phone reps typically won’t educate you on your options. Here are a few general rules that will help:
• You won’t get anything if you don’t ask. If you don’t pick up the phone and call the card issuer, they won’t offer you anything. Even when you are talking to the agent, it is ok to ask if they have any other deals if you don’t like what they are offering. But sometimes, they legitimately have nothing to offer.
• Hang Up, Call Again. If you get an agent who is having a bad day or just isn’t
giving you the answer you want, it’s ok to call back later and try again with a different agent.
• You can still call the bank after your annual fee hits the account, and all the major issuers will be able to reverse/reduce/refund that fee so long as you take action on your account within 30 days.
• Don’t be afraid of annual fees, but don’t pay them unless you are getting enough value back. I see it as a reciprocal relationship with the bank. They get value from having you as a customer, so you should get value from carrying their card. Knowing which cards are giving you perks that you value (spending multipliers, lounge access, travel credits, etc.) will make it much easier to decide what to do with that card.