Should you cancel your travel credit card?
5 money-saving moves for dealing with a high annual fee
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If you have a premium credit card, you likely consider the top-tier benefits worth the hefty annual fee. These luxury cards typically come with complimentary airport lounge access, free flights and hotel stays, travel insurance, and lucrative rewards systems.
About 29% of Americans have a premium credit card with an annual fee greater than $300, according to a March 2020 survey commissioned by The Points Guy. But chances are, your premium card isn't getting much use due to travel restrictions, social distancing measures, and tighter budgets in general.
Many Americans are cutting down on activities that used to earn them mega credit card points. If your premium credit card is collecting dust in your wallet, here are some things you can do.
Maximize temporary benefits
Many issuers have updated benefits and rewards programs to align with the pandemic-driven changes in consumer spending. If your credit card has recently made changes, you may find new ways to justify the annual fee. Most of these offers are temporary, so check with your card issuer for specifics.
Here’s how some credit cards are adapting their offerings:
- Among our favorite cards to take abroad, the Platinum Card from American Express comes with a $550 annual fee, but cardholders get up to $40 in statement credits each month when they use their card for select streaming and wireless telephone services through the end of the year.
- The Marriott Bonvoy Brilliant American Express is one of our top picks for hotel perks. Cardholders, who typically pay a fee of $450 a year, can get up to $300 in statement credits when they make eligible purchases at U.S. restaurants, including takeout and delivery. The offer ends at the end of August 2020.
- Even with its $550 annual fee, the Chase Sapphire Reserve is one of the best credit cards you can have in your wallet. Chase is offering 5 points per dollar spent on Instacart and gas station purchases, and 10 points per dollar spent on streaming services. The new bonus rewards are available through September, and come with spending caps. Points are worth 1.5 cents apiece when you redeem them for statement credits against grocery store purchases and other new categories. And through the end of the year, Chase will take $100 off the annual fee when you renew.
- The Citi Prestige® card, which comes with a $495 annual fee, is one of our top recommendations to bring overseas. Right now, cardholders can use their annual $250 travel credit on supermarkets and restaurant purchases through the end of the year. And through August, you earn 5 ThankYou Points per dollar spent on all online purchases, up to a total of 7,500 points.
- Discover credit cards don't come with an annual fee, but as the pandemic reshapes what it means to travel, the card issuer has announced permanent changes to its travel rewards program. In the past, Discover it Miles cardholders could only redeem miles for travel purchases. As of June 9, miles can be redeemed for eligible restaurant and gas station transactions, too.
Ask to waive the annual fee
Issuers are being “very flexible” about accommodating cardholders impacted by the coronavirus and the economic fallout, says credit expert John Ulzheimer, formerly of FICO and Equifax. They may agree to waive or lower your annual fee, but the biggest issue might be getting through to a live person to make the request.
You can also ask to defer payment of the fee, Ulzheimer adds. “It doesn't mean they'll say ‘yes,’ but you can certainly ask.”
If the annual fee is non-negotiable, ask the issuer about other cost-saving options.
Take advantage of hardship programs
Some issuers are allowing cardholders to defer minimum payments, lower their APR, or skip late fees during the coronavirus pandemic. You might be able to request these options online or by picking up the phone.
But Ulzheimer offers this tip: “Only ask for help via a hardship program if you actually need it,” he says. “Don't get tempted to ask for an accommodation simply because you want to skip some payments.”
That’s because lenders may eventually ask you to pay back any skipped payments or waived late fees after the COVID-19 “covered period” ends.
Downgrade the card
Downgrading a credit card means swapping your card with one that comes with lower costs and (usually) fewer benefits.
This strategy does have some upsides, however. It’s usually not considered a new account, so it shouldn’t result in a hard inquiry on your credit report. Plus, the age of your accounts won’t change, which can help you maintain your credit health.
But “choose this option carefully,” Ulzheimer says. “You may end up giving [the lender] an incentive to close the card or lower the credit limit.”
Close the credit card
If you’re financially struggling and your issuer refuses to budge on its high APR and annual fee, you might be better off canceling the credit card.
There are some things to consider before closing the account. This move can have a short-term impact on your credit scores, and you’ll need to spend any rewards and shift recurring payments to a new card before closing the account. You’re also still on the hook for paying off the balance. But if canceling the card will help you save money in the long term, then consider this option.
There are several ways to deal with an expensive credit card, especially during the coronavirus pandemic. The best move is to call your issuer. Ask about special programs, new benefits, and cost-saving measures. But don’t be afraid to downgrade or cancel the credit card if it’s in your best interest.