Don’t Get Stuck Paying Credit Card Annual Fees

Any discussion of earning points and miles inevitably leads to signing up for credit cards offering high sign-up bonuses. Those cards typically are accompanied by annual fees (starting at $75/95 and going up as high as $1000). If you’re trying to earn miles and points for a better life or an early retirement, you can typically avoid those pesky fees and this article will walk you through that process.

The What

  • Credit cards that have high sign-up bonuses usually have an annual fee after the first year.
  • Annual fees for most cards are in the $75-$95 range, but paying them for just a few years can negate many of the benefits of using the card to begin with.
  • You do not just want to just close any credit card that has an annual fee because it could have a negative impact on your credit score. Contrary to popular belief, having a number of open accounts is not really a negative to your credit score. The blended age of accounts and total amount of available credit is far more important, and habitually opening and closing accounts will hurt you more than it will help

What You Can Do About It

  • In our experience, even if the annual fee has been charged to your account, you have until the payment due date to avoid paying it without extensive teeth-pulling. Your options will be greatest though early in the process and the more proactive you try to be in addressing the fee.
  • The first step you should take is to call the number on the back of your card and ask to have the annual fee waived or reduced. ALWAYS be polite and respectful to the people you speak to – you’re trying to get a favor, not exercising a right. Mention specifics like how much you enjoy using the card for XYZ, how much you plan to spend on it, and anything else that may make you more appealing as a customer (but be honest). Sometimes this will work. Often, it will not. If they say no such option exists, ask to escalate the issue to a manager.
    • When speaking to the manager, repeat the reasons you’d like to have the fee waived or reduced and mention if you are considering using a competitor’s product. If they still don’t offer you any options, ask if you’re eligible for a spending bonus on the card. In the past, we have received offers like 10,000 airline miles if we spend $1000 or $3000 over the next three months, which is enough to offset the fee for a year. If you still aren’t getting anywhere, say thank you and that you will think it over and call back.
    • Call back and try the above steps again. Your experience will vary wildly based on the representative you get on the phone with and their training.
  • If after 2-3 calls you are not getting any bites, then at the end of your last attempt to get the fee waived, say that you would like to know if there’s a way to downgrade the card to a fee-free card (and ask if there can be a spending bonus on the new card).
  • Every credit card company has fee-free credit card offerings. Typically, the earnings aren’t as lucrative (and sign-up bonuses weak or non-existent), but banks will happily product change your card that has an annual fee to a fee-free version during a call because customer acquisition is so expensive for them.
  • If you end up with just a fee-free card and no bonus, don’t be bummed out. You’re now avoiding the fee, have a greater availability of credit, and will one day be eligible (hopefully) for the bonus on the fee version of the card again (depending on that card company’s specific rules). If you don’t plan to use the fee free version of the card in your day-to-day life, call to implement a lock on the account or a cap on daily spending to avoid nefarious folks taking advantage of you, and then toss that card into a safe place.

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