This is the twenty-eighth post in a monthlong series that started here. Each post will take about two minutes to read and may include an action item that takes the reader another two minutes to complete. I am writing this for an audience of people who know nothing about frequent flyer miles, and my goal is that by the end, you know enough to fly for free anywhere you want to go.

Most travel credit cards have an annual fee. One of the main questions people email me to ask is whether they should cancel one of their rewards cards before the next annual fee.

Whether you got a card from my list of top current credit cards or from a personalized suggestion during a Free Credit Card Consultation, eventually you’ll probably wonder whether the card is worth keeping through its next annual fee.

I’ll lay out the two-step process you should use to determine which cards to keep and which to cancel.

How do I approach the decision of whether to keep or cancel a card?

Reader Joanna emailed me to let me know the results of calling Barclaycard:

“My US Airways® Premier World MasterCard® annual fee was due August 29. I called and got 5,000 miles for $1,000 spend over 90 days and annual fee waived for a year.”

Barclaycard is really going all out to get people to get this card, keep this card, and use this card, and Joanna’s email is another example. (Your mileage may vary.)

We know that the US Airways® Premier World MasterCard® will no longer be offered as soon as the US Airways and American Airlines frequent flyer programs integrate, some time in early 2015. That means that the chance to earn 40,000 bonus miles after first purchase will disappear soon. Check out all the places you can go with just the sign up bonus.

We know that Barclaycard offers many cardholders big bonuses for ongoing spending like Drew who was offered 15,000 bonus US Airways miles for spending $500 per month for three consecutive months.

And now we know that Barclaycard will waive the annual fee for some folks who call and ask like Joanne did.

By the way, Joanne asked me about her other carrot, whether she should spend $1,000 in the next 90 days for 5,000 bonus miles. I gave her a resounding “YES!” That means she’ll get six miles per dollar on those purchases, 1,000 for the normal purchases and 5,000 bonus miles for $1,000 in spending.

Six miles per dollar is a fantastic deal, especially when we’re talking about US Airways miles, which are the highest value miles in the world in my opinion.

Have you had success getting the annual fee waived on the US Airways® Premier World MasterCard®? Share your story in the comments or by sending me an email.

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I just applied for three cards:

I’ll earn 165,000 very valuable miles after spending $10,000 in three months on these cards. Miles that I value at around $3,000. Miles that can get me back into Cathay Pacific First Class or Emirates First Class.

IMG_0051
My Cathay Pacific First Class Bed

It had been about three-and-a-half months since my last applications, and I always like to wait at least 91+ days between applications. (Last time I got the ThankYou Premier and Arrival Plus.)

I always suggest that people figure out how they would want to use their miles before they open any cards. Think about the exact trip you want to take including cabin class. Then work backwards from there to figure out the best type of miles for that trip and then the best card to open to get those miles.

Since I don’t have any specific trip goals in mind, and since I already have miles on hand, I just picked the best cards to pad my current balances.

  • Why did I pick these three cards?
  • What will I do about the high minimum spending requirements?

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The other day I got a question from a reader who said he’d recently accidentally paid some annual fees that he hadn’t meant to because of bad organization. He asked for my system.

As a bit of background, almost every reward card we have has an annual fee. Many credit card offers waive the annual fee for the first year, but after 12 months of having the card, you are on the hook for the annual fee for the second year.

For me to pay $95 or $175 or $450 to keep a card, I need to be getting some great benefits, and I rarely see keeping the card through the annual fee generating positive value. In fact, the only card I have kept recently was the Chase Sapphire Preferred because its 2 points per dollar on dining and travel are categories I use a lot and a 7% points dividend at the end of the year make it my go-to card when I’m not clearing sign up bonuses.

So how do I keep my credit cards straight, so I know when to cancel a card and avoid an annual fee? It’s actually a simple computer-free system. Printed on every credit card is its expiration date. You may have noticed that the month in that date corresponds to the month you opened up the card. So if your card’s expiration date is 12/15, then you opened that card in December.

If you opened the card in December, that means annual fees will be due each December.

I have two places for credit cards–my wallet and my sock drawer. My wallet contains one to three cards, generally cards that I’ll be using that day to meet spending requirements or as a back up. I keep my Sapphire Preferred in my wallet whenever I am clearing AMEX sign up bonuses, for instance, since AMEX cards are not always accepted, and I want to earn points on all my purchases.

In the sock drawer, I put all the cards I won’t be using that day. I order them in a stack from next annual fee date to farthest away, simply by noting the month in their expiration dates. Right now cards with a February expiration date top my stack (because I’ve already dealt with January cards.)

I tend to see the pile once a month or more because it is next to my pile of loyalty cards, which I need to access occasionally. When I see the pile, I decide whether any action is needed on the top card. If not, I ignore the pile. If so, I look through the pile and act on all cards that need action.

For more reading, see Credit Card Cancellation Negotiations.

This post is part of a series that will detail verbatim my negotiations with credit card companies to squeeze every last point and cent out of my cards.

Last August, I opened both the Citi AAdvantage Visa and Citi AAdvantage Amex at the same time to earn 150,000 American Airlines miles. The Visa had a spending requirement of $1,500 within four months to unlock its 75,000-mile bonus. After hitting that bonus, I moved on to unlocking the Amex’s bonus then on to other cards. I haven’t made a purchase or payment on the Citi AA Visa since last September.

Today, about three months before the $85 annual fee is due, I followed my standard procedure of calling up to extract a retention bonus, which I described in this post. Why do I call three months before the annual fee is due? It’s close enough to the fee’s date that I can tell them I’m calling to cancel my card because of the impending fee. But it’s also far enough in advance that I can accept a retention bonus challenge, complete the challenge, see the statement credit or points post, and still close the card before the annual fee if I don’t think I want it going forward.

When I called, I gave my security info to access my account. When the representative asked why I was calling, I said, “I’m calling in because the annual fee is coming up, and I can’t justify paying the annual fee, so I want to close the account.”

She responded, “We’ll get you over to a representative about closing the account.” I was put on hold for about a minute. So far this is standard procedure. Instead of asking about a retention bonus, I just said I wanted to close the card, knowing I would be offered one.

When the new representative from the retention department came on, we made small talk about the weather in California, South Dakota, and Florida for thirty seconds. Being polite probably doesn’t help unlock a better offer, but it certainly does not hurt.

I repeated my line. “I’m calling in because the annual fee is coming up, and I can’t justify paying the annual fee, so I want to close the account.”

She noted that I had not used the card very much. (An understatement since I haven’t used it in eight months.) I responded by saying, “At first, I was using it and enjoying the benefits. But I found that the transferable points programs offered by Chase and American Express better meet my needs.”

At this point, she started to talk about the benefits of the card. They often do this to see if you’ll stick with it without a retention bonus or at least to soften you up. She mentioned the free checked bag on AA if you use the card to buy the ticket. This is worth $25 each way, but I almost never check a bag. She mentioned priority boarding, though I prefer to board last usually, and she mentioned the 25% inflight savings on AA purchases. Twenty-five percent off AA food in coach is worth at most $2 to me.

She actually didn’t mention the most valuable benefit of the card. Citi AA cardholders get a 10% rebate on the miles they spend on AA awards, up to 10,000 miles rebated (100,000 miles redeemed) per calendar year. That’s a free 10,000 miles a year for me for holding this card, and since I value 10,000 AA miles at $177, this alone more than pays for the annual fee of $85.

After politely listening to the benefits, I held firm. “Those are nice, but I can’t justify paying the annual fee just for those benefits.” At this point, she offered me 3,000 AA miles if I made $500 in purchases on the card within 3 months.

Never accept the first offer. There are usually several she can offer you, and you want to hear all of them to decide which is the best value.The offers usually come in a few flavors: miles, statement credit/waiving the annual fee, increased rate of mileage earning for a defined period.

I replied, “That’s a good offer, but I was hoping you could waive the fee.” This was to get an offer to waive the annual fee or to receive a statement credit. She said that she could not waive my fee, but she could offer me a $25 statement credit after $500 in purchases within 3 months.

To me this is a clearly inferior offer to 3,000 AA miles, which I value at $53.10. I persisted, asking for an annual fee waiver, but she said she couldn’t offer me that.

Instead she offered me a Citi AA card with no annual fee that earns miles at a rate of 1 mile for every $2 spent and has none of the benefits mentioned. I have no interest in that card, so I accepted the best offer: 3,000 AA miles after $500 in purchases in the next 3 months. For those $500 in purchases, I’ll be earning 7 miles per dollar (3,000 bonus miles + 500 normal miles divided by $500), which is a nice 12% rebate.

She told me that the bonus miles will post within 1 to 2 statements of completing $500 in spending, so I’ll be sure to complete the spending requirement before my next statement. That way the miles will post before the annual fee is due, and I can still cancel the card if it doesn’t fit into my future card plans. This is the exact reason I call in 3-5 months before the annual fee is due.

The offers I received were a step down from the offers I received when I called a few months back to “cancel” my Citi AA Amex card. On that call, I was offered an $85 statement credit after any five purchases. So a better offer for less spending. In that case, I made seven purchases for about $100 and got the $85 credit on the same bill. I don’t know if the inferior offers were a result of Citi lowering its offers or because I had spent more money on the Citi AA Amex ($5,000 vs. $1,500 on the Visa.)

This post was a reminder to call up to “cancel” your credit cards 3-5 months before the annual fee is due. Hopefully the example of my dialog has shown you how easy it is to get a retention bonus for a few minutes of your time. I’ll keep you posted on when the bonus posts and whether I cancel the card before paying the annual fee.

 

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