Many of the credit cards out there that give the wonderful sign-up bonuses come laden with fees. Some of these fees are waived for the first year, but there are some cards which have fees that levied right away. Some of them can be pretty hefty fees – the upper tier, airline branded cards, for example. They range from $395 – $450 annually! For most consumers, that is not something that is a good deal.
However, should you sign-up for one of those high fee cards (because they have a bonus you cannot turn down or you are drawn to some of their elite perks), keep in mind that you are basically just paying up front for a year of owning the card. Should you decide to close the account before the card’s anniversary date, you will receive a pro-rated refund of the annual fee that you paid at the start of the year. Now, it is normally not a good idea to cancel a credit card as it does not reflect very well on your credit report to have multiple credit card closures. Not only that, but the banks are able to track users and when they see people that receive huge sign-up bonuses cancel their cards shortly after the bonuses post, they will make it difficult for you in the future. But what do you do with that large annual fee looming closer?
There are a couple of things that can be done and these are things that I have personally done.
- Call the credit card company and tell the wonderful automated system that you want to cancel your card. This will route your call to the retention department. It is their job to keep you as a customer. They have a lot of leeway with what they can offer to keep you. Decide before you call what would be the value of an offer that would keep you as a customer (with that particular card). In my case, I recently wanted to cancel my American Express Platinum card since I found I was using my Premier Gold Rewards card more and the Amex Plat card has a $450 annual fee. So, I called them with the plan to cancel but was open if they were going to offer me something that would make it worthwhile in my case to keep it (it is a very valuable card, but it wasn’t going to be the best fit for me at that price for this year). They offered me a $100 statement credit if I kept the card. I appreciated the offer, but was looking for more than that so I politely declined, and explained my reason for cancelling (the credit card companies like it a lot more if you are cancelling a card because you are doing more business with another of their card’s than if you are cancelling their card because you aren’t using their products anymore! 🙂 ). He was polite as well and he closed out the account. What happened? I received a pro-rated refund for what was left of my year!
- Call the credit card company, but do not call to cancel. Rather, call to downgrade your card to a low-fee or no-fee card instead. This way, you are able to keep your credit history alive and well with the bank and you get to keep your line of credit. This tells the bank that you are a satisfied customer of their institution (if not of the specific product) and you will continue to do business with them. Remember, for every high-fee card out there, there is some lower-fee alternative that you will be able to switch to. One word of warning: do not switch to a card that has a great sign-up bonus. Those bonuses are often reserved for the first-time customer. If you are down-grading a card, you are not eligible for the sign-up bonus. So, the better tact would be to select a card to convert to that is not on your list of cards to get. For instance, when I called to cancel my Amex Platinum card, I was offered to switch to the Gold card or the Green card. Now, the Gold card has very good sign-up bonuses that are available from time to time. If I did not have the Gold card, I would not have wanted to switch to the Gold as I would have lost my ability to open that account in the future for the bonus. The Green card was not something on my list and, if I needed to keep a card open, would have been an ideal card to switch to. My case for this option, however, has to do with my Chase Presidential Plus card. It was coming up on a year and I was no longer flying Continental as much as I had before. I did not want to have to pay the $395 fee, so I called to specifically request that they switch my card to the Chase OnePass Plus (which I had had before and was therefore not eligible for the sign-up bonus anyway). No problems – was told of my new annual fee ($85) and was thanked for my business. Two weeks after changing that product, I received a pro-rated amount for the time that was left on my card – enough to cover my upcoming $85 fee!
- Lastly, call the credit card company prepared to close the card whether they offer something or not. This was the case with my Delta American Express Reserve card ($450 annual fee). I had originally gotten it for the Medallion Qualifying Miles that it offered and the Delta Skyclub access it offered as well. Since I had gotten it, I had made Diamond Medallion status and was comped a Delta Skyclub membership, so a big perk of the card was no longer of value to me. So, I called and told the agent just that – that the card was no longer servicing me in the area for which I had originally gotten it. He checked my account and told me could offer me 10,000 miles to keep the card. I thanked him very much, but told him that I would like to just close it. He closed it and then informed me that I would be receiving a refund for the unused portion of the card’s year. Sure enough, two weeks later, I had a sizable credit on the account for the remaining portion of the year.
So, those are some scenarios that played out in real life for me. In each case, I received a refund according to the time left on the life of my card’s year. This was very helpful and should be remembered in case you need to close a card. Remember, card closures should be for good reason and few and far between. Having a lot of credit cards open does not really hurt your credit score, but closing them will. If they are high fee cards, it will look better to the next bank with which you make application as there is a definitive reason for cancelling the card. In addition to cancelling due to high fees, another valid reason would be to make way for another card with a particular bank. For example, an individual is only allowed to receive a certain line of credit with a particular bank. After that person reaches that line of credit, they are unable to receive any more cards. So, in that case, do not be afraid to call and ask them to shift your credit lines around to make room for the new card. I have had the major banks do that for me many times before.
Hopefully this will help you as you look in your wallet and contemplate the upcoming credit card fees that you may have. Remember, they may be offsetting with the benefits you receive in return, but know your course of action should it not be worthwhile to you.