While the sub up bonus (SUB) for any points and miles credit card should always far outweigh the annual fee for a card in the first year, once the annual fee for the second (or later) year posts, you will have the month to decide whether to keep, downgrade, or cancel the card.
Check out my video below to see me walk through the American Express Business Platinum card benefit review worksheet live! I include some tips and tricks in my video about benefits you might not be aware of towards the end of the video, too, for those patient enough to watch 🙂
For cards with no annual fee, the choice is simple – keep the card; this costs nothing and extends your credit history and credit limits. You may want to close a no annual fee card if enough time has passed that you can open it again for a new SUB or if you believe having the account open if problematic in some other way. For example, if you have two Chase Ink cards and you are looking to get a third, recent data points suggest you have a better chance of succeeding the fewer Chase Ink cards you have open.
Back to cards with annual fees… One objective way to help you make the decision, is to review the value of the card benefits that you used over the past year and compare that value to the cost of the annual fee. If the value of your used benefits is greater than the cost of the annual fee, then great, it probably makes sense for you to pay the annual fee and keep the card for another year. Just make sure you continue to use your benefits! On the other hand, if you find you have rarely used any of your card benefits, then the annual fee may likely be larger than the benefits you obtain from the card. In this case, you should consider canceling your card, or downgrading to a lower fee or no fee option, if available. Of course there is also a chance that the value you get from your card is less, but not significantly less, than the annual fee. In this case, you should evaluate whether or not you will keep using the benefits you took advantage of last year and whether there are any additional benefits you may use in the coming year. Usually, you don’t want to keep a card year after year if you aren’t at least averaging breaking even on it!
While this sounds simple on paper, I have found it challenging to keep track of the my eligible card benefits and the value I have obtained from the benefits and offers that I have used. While I do use many apps to help keep organized, I have never been happy with the options available to help me determine whether or not to keep my card at the end of a year. As a result, I decided to make a simple Excel worksheet to track my annual fee, the most common benefits, what benefits I have used, and what I truly value those benefits at – since the value I place on any one benefit may be more or less than the cash value assigned to that benefit. The worksheet compares the value of my used benefits to the annual fee and lets me know if I should keep, downgrade or cancel. The workbooks attached for download below are here for you to use, too, if you need some help tracking your benefits! The workbooks are card specific and I will continue to add new workbooks over time.
Whether or not you plan to keep, downgrade or cancel a card, you should always call or chat with customer service and ask whether or not your card has a retention offer attached to it. You should explain that your annual fee has posted and you aren’t sure whether or not the benefits of the car outweigh the costs of the annual fee. Sometimes you will have no offer, but other times you might be offered another SUB for hitting a new minimum spend or they could offer to waive a portion of your annual fee with or without spend. If you intended to keep your card all along, the offer is just an additional bonus for you. If you were on the fence or intending to cancel, then a good retention offer might get you to reconsider – and that is okay.
Last, you might be wondering what the negative impact of closing a card might be. There are a few things to keep an eye out for. First, when you close a card, your total credit limit will decrease. If you are closing a card with a small credit limit or you already have many cards open, the impact is likely to be minimal and you may see a temporary dip in your credit score of 5-10 points. The other consideration is that you will lose that cards contribution to your credit history tenure. If this is a relatively new card, the impact is likely to be small or negligible. However, if you have had the card open for 10 years, the impact could be larger. Oftentimes, for this reason, you may prefer to keep or downgrade such a card over an outright cancelation. One final considerations are what will happen to your points and miles if you close the card? Usually the answer is nothing, you will retain the points and miles you have earned, but it is good to double check because it would be horrible to lose them due to a simple oversight.
Disclaimer: None of this is financial, investing, or legal advice, and while I would encourage you to make sure you have done your own research on this topic.
