Keep, Downgrade or Cancel: What to Do When the Annual Fee Hits

1. Keep every card open for at least 12 months

Do not close a card before it has been open a full year. If you close early, the bank can take back the points from your welcome offer. Wait out the year, then decide.

2. Ask for a retention offer first

Before you do anything else, call or message the bank. Tell them you are considering closing the card and ask if they have any retention offers.

They may offer you extra points or waive the annual fee. If you like what they offer, take it and keep the card.

Keep it

Keep the card if the benefits you are actually using are worth more to you than the annual fee. Credits you will really use, a free night, points you can transfer — if that adds up to more than the fee, it stays.

I also like to keep some cards open just so I can share my referral links with friends and family — when someone signs up through my link, I earn bonus points.

If it does not make sense anymore, you have two options left.

Downgrade it

Downgrading to a no-annual-fee card is usually the better of the two. You keep the credit line open and keep building that longer credit history.

Ask the bank two things on that same call: what happens to the points already sitting on the card, and what the new card earns going forward. A no-fee card in the same family often earns less, and at some banks those points cannot be transferred to airlines or hotels unless you still hold a card that allows it. If your points would be at risk, move them before you switch.

One caveat with Capital One: some reports say you will not get the annual fee refunded if you simply downgrade after it posts. I have called in before the fee hit and asked to downgrade instead — I was never charged, and they did not ask for any miles back.

Cancel it

If you cannot downgrade and the card is no longer giving you anything, cancel it.

• Business cards that no longer have value are easy calls — closing them does not affect your personal credit score
• Some welcome offers can be earned again later, but usually not while you are still holding the card, so closing it opens that door back up
• If you close within 30 days of the annual fee posting, the bank should refund the fee

Never close a card with a balance on it, and think twice before closing your oldest account.

Do not let a fee surprise you

Set a reminder a month before each anniversary, or use the Travel Freely app, which tracks your cards and reminds you when a fee is coming. That way this is always a decision you make on purpose.