Credit Cards

How You Can Eliminate Your Credit Card’s Annual Fee

Comments 33 Comments

Nobody likes paying an annual fee to use a credit card, but many of the top reward cards require it. But what if there was a way to keep your account while having your annual fee waived? In fact, many cardholders have been successful in doing just that. Do you want to join them? Here’s how:

1. Wait for the best offers. Avoiding annual fees starts the moment you apply for a card. Some cards with annual fees will feature offers that waive these fees for one year for new applicants.

2. Look for a card with a generous sign-up bonus. Annual fees are no fun, but be sure to put them in context. For example, Chase is currently offering their Southwest Airlines Rapid Rewards Plus Visa card with a $69 annual fee. But consider that new cardholders earn 50,000 points after spending $2,000 on their card within two months. Since these points are worth over $800, the annual fee is a trivial expense by comparison.

3. Negotiate your fee when it comes time to renew your card. Many credit card users do not realize that these fees are not set in stone. Banks spend hundreds of dollar in advertising and marketing costs to acquire each customer, and they don’t want to lose your business over an annual fee. So before you accept this fee, contact your bank and ask them to waive it. Mention that you are considering cancelling your account and using a competing card, and you will likely be transferred to another department that specializes in making offers that will retain existing customers.

Ideally, the bank will waive its annual fee, but there are a few other possibilities. In some cases, the bank will refund a portion of the fees, while others may offer you some amount of reward points or miles to retain your business.

4. Cancel your card. If your bank refuses to negotiate on your annual fee, you can always just call their bluff and cancel your card. Then you can actually try a competing product with a waived annual fee or no fee at all. But if you still miss your old card, don’t worry. The bank will happily welcome you back with another sign-up bonus, so long as you wait about 12-18 months.

While it is tempting to imagine that annual fees are an inescapable part of some reward credit cards, there are ways around paying them. By employing all of these techniques to avoid these fees, you can earn plenty of rewards without paying the price.

[Credit Cards: Research and Compare No Annual Fee Credit Cards at Credit.com.]

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  • John

    You should advise that canceling card has credit score repercussions

    • Sean B

      True, but it isn’t a big impact.

      • Iknowall

        Depends on where you are at on your credit scores. A small drop in your credit score at around 720 could mean the difference between getting credit and not.

      • KT

        Depends on how old the card is/what the limit is.

      • Travis

        It can be a huge hit if it affects your debt to credit ratio as well.

      • KnowItAll

        Don’t know where you folks got your information but its all wrong. I was a financial planner & mortgage broker. Cancelling cards have no impact except positively – your credit score is based on points for on-time payments, total amount of debt, total amount of potential debt (that is credit you haven’t used but have – this is where cancelling has a positive effect)!

        • Taz

          Hello, Mr. financial planner, do you know what is called “credit utilization” and “average age of credit”? These are two factors that affect credit score. Closing a credit account will have a direct impact to these two factor and negatively affects your credit score.

          • Steve

            Hold a credit card or two long term that have zero costs to maintain credit history and recycle the ones that have annual fees.

        • Credit.com

          “Cancelling cards have no impact except positively – your credit score is based on points for on-time payments, total amount of debt, total amount of potential debt (that is credit you haven’t used but have – this is where cancelling has a positive effect)!”

          Unfortunately, this isn’t true. You have some of it right but you’re missing a very big piece of a credit scoring algorithm. Credit scoring models do factor in your utilization percentage on your credit cards but closing an account doesn’t have a positive affect on this aspect of the calculation. If you close an account, essentially closing off the available credit limit, and it causes your revolving utilization to spike — it will impact your score. How much it impacts your score will depend on how high your utilization spikes.

    • Paulo JC

      Hey John, Excellent Observation!

    • Credit.com

      It’s true. There are situations where closing a credit card makes sense but you do need to be aware that closing a card can have negative repercussions when it comes to your credit scores. It depends on how closing the account impacts your credit card utilization percentage. If closing the card causes a spike in your utilization, your scores will take a hit. You can read more about credit card utilization (also called revolving utilization because credit card accounts are “revolving” accounts) here: Credit 101: What Is Revolving Utilization?

  • Chris

    Yes I have a question I have a Bank of America credit card. I have never been late with any payments. I just recently was told I would inquire an annual fee of 59 dollars a year. I have never had an annual fee till this year. Luckily I got it waived for this year. What should I do for the rest of the time I have it? Like next year.

    • MizGrandma

      Re-negotiate with Bank of America next year; just remember they have always had an anal-retentive corporate personality & that they really don’t care about individual customers. I’ve had the same checking account & a credit line with them since 1968, but they canceled my credit line in 2011 when my husband died & made me reapply. Fortunately I qualified. If they turn you down next year I’d ask for the customer retention dept. & try there. In the meantime, have backup cards available in case you want to cancel. You can cancel the account & still make payments. There are plenty of cards available that have huge sign-up bonues + additional perks (e.g., Amex; British Airways,which doesn’t charge a foreign transaction fee; U.S. Airways, American Airlines). I’ve earned 150,000 miles in just the past few months by getting new cards. Note that although extra inquiries can bring down your credit score, the decrease can be offset by your new credit lines. The more available credit, the higher your score. Good luck!

    • Mike

      I’ve worked on the other side before for a credit card company. They most likely added the fee because they weren’t earning enough money from you otherwise. They don’t issue credit cards out of the goodness of their hearts and the bank pays for the line of credit they hold open for you. If you are paying interest (rather than paying off the balance every month) or using the card a lot and generating transaction fees, it makes a huge difference in what they will do for you when it comes to fees. They do want to keep their customers though and will do what they can for you when you call and request it. Also call and ask what benefits come with your card. Along with the annual fee they may have added some new perks. Many people don’t know about these and some are pretty nice. If nothing else call around, there are lots of variations on what different cards offer and there may be something that’s a much better fit (wait to apply until you find something you really want).

      I apologize for the wall of text and I hope I don’t sound like some bank lackey. I actually couldn’t stand the industry and ran for my life. I did learn an awful lot about credit cards though and it broke my heart to talk to people who just didn’t fully understand what they were dealing with and the stress it caused them.

      • Credit.com

        Excellent advice, Mike. Well said.

  • http://yahoo Eugene Fletcher

    This is a fact about fees!!!

  • David

    Horrible advice! None of these suggestions (other than arguably the last one) “Eliminates” your annual fee.

    On top of that, the advice given to cancel your credit card every year, then open a new one, then move back to the old one 12-18 months later will WRECK your credit. You get dinged for credit inquiries associated with opening a new account, you lose the credit history of the old account and you get dinged again for having new revolving accounts that aren’t seasoned.

    BAD ADVICE – other than just calling to ask if they’ll waive it.

  • Shuckapeafarms

    The ultra rich use the credit bureaus for unscrupulous means. Outside of that, it has NO VALUE what-so-ever! Just like ChexSystem that most banks will ignore outside of the TOO BIG TO FAIL criminal empire!
    The interest rate for the “little People” ranges in the 20 percentile and banks don’t in general negociate those terms!
    All those “low intrest” rates you see like 3% car loans, 2% mortgage rates, and others don’t apply to the “Little People” as they are reserved for the 1%ers whom have millions if not billions in the banks. Your measily bank account means NOTHING to these parasitic banksters!!

  • Anne Fletcher

    When you cancel a credit card it has a negative affect on your credit card. Leave the card open at $0. Major credit cards will respond to competitive credit card rates. If you have been paying on time for 12-15 months call and request a deduction in the annual rate, e.g. 15.99 down to 12.99 but you need to speak with the department that has the AUTHORITY to decrease the annual rate. Most cards will comply if you plead a good case. Keep in mind that Fed rates are at an all-time low and if prime is at 5% or less you are paying the credit card company 10 or more points for the use of the card. That is outrageous. Tell them you will not cancel but stop using the card then stop using it for several months and call back.

    • Sweetlumps

      I work for a credit card company that never waives the annual fee.It is a company that works with people that are trying to rebuild their credit. It is part of your cardholder agreement. Yes, you can close your account, but I don’t advise a bluff. After 30 days you cannot reopen the account and you will have to wait to see if you receive another offer. And yes, if you have a credit limit of $3,000 with a zero balance and close it because of a $3 monthly fee, you may hurt your credit score, but I get these requests all the time. But people are so obsessed with their credit score. If you are trying to buy a house or a car with no interest it matters. If you already have those things, so what? If you pay your bills on time and keep your debt ratio low you can buy anything you want.

  • pam C

    We are currently in a Ch. 13 and only have a few more months until it is paid. I was checking out different air mile perk cards to see which one might be a good starter card to begin building our credit score. I have read it isn’t a wise idea to pay off your balance each month, as it could hurt your credit score. Is that true? We’re looking into getting a card for air mile perks and using it to pay our essentials like groceries, gas and household bills but had plans to pay off each month. What would you recommend?

    • Anonymous

      If this were true, I wouldn’t have an 800+ credit score as I pay my cards off in full every single month.

    • Credit.com

      Not true, in fact the lower your credit card balances (in relation to the credit limits), the better for your credit score. Carrying a balance from month to month will cost you money in interest too, so stick with paying off the balance in full each month if you can. It’s the smartest, single most effective way of managing a credit card to your benefit — for your wallet and your credit score.

  • Gary Rosen

    As usual – useless, no information article.

    Specifically – Negotiate for a lower fee or no fee.

    Yea – in real life, that NEVER happens to ordinary people. It’s been a long standing joke that articles say you can negotiate anything. Try that at a department store, a utility or cable company. More crap to fill our minds.

    • Anonymous

      Gary, you must not be a very good negotiator or perhaps you just ask if they negotiate and do not actually try negotiating? These days all you have to do is look up the product on your smart phone and then you pretty much know the lowest price you can get it for. If they won’t give it to you for that price then you walk. Utility companies you can’t negotiate with because the government regulates the pricing, but if your cable company has competitors you can even negotiate with them, I have!

  • TechPapa

    Move your money to a Credit Union! The real solution is to quit dealing with banks altogether. Banks, particularly big banks, do not care about depositors, only stock holders. As a Credit Union member, YOU are the stock holder! Banks are tyrants! End the tyranny by switching ALL accounts to a CREDIT UNION today!

  • John

    John is correct. Cancelling a credit card and taking another, even if you do not use the new card, has adverse credit implications. I took an Amex card and returned it within a month unused. It stayed on my credit report for two years, I think. This does not help if you need another line of credit during the two years.

  • http://nationalshowtickets.com Debbie

    Just to support the message, each year when my annual fee is charged I do call the bank and they have always waived it or adjusted a credit amount. Only last time did they charge their $39 annual fee and then they credited $35 in credit so they got me for $5 but sometimes you have to just go with the flow of things.

  • Frank in Florida

    I don’t like paying an annual fee for my American Express Gold card, however, I do get free roadside assistance, rather than pay for Triple AAA, etc., even if I’m only a passenger in someone else’s vehicle. I also get double the factory warranty for anything I purchase with it. That’s worth the cost of purchasing an extended warranty to twice what a manufacturer offers. Free rental car insurance, triple points for purchases at gas stations and grocery stores and many other perks including lowest cost travel arrangements. Plus I can use my Amex Membership Rewards points to convert to frequent flier miles and get flights on many airlines. Same with hotel partners. Amex also offers transfer bonuses once in a while for airline miles, like 1,500 or 2,000 miles for 1,000 points. I’m not stuck with just one airline card. Similar discounts for general merchandise is often available. I just picked up a new Taylor Made RBX 2 driver and fairway wood at a huge point value discount. Having said all that, I still try to negotiate my annual fee away! Sometimes it works. Sometimes not. I’ve had the card since 1973.

  • Doug

    Nobody should be scared by the “credit score repercussions” manipulation that those financial institutions use as a scare-crow thing against people. If the credit is mine, that i must deal withit, you don’t want to give it to me then shove it up, there is still the cash, which i take it you still want it…

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  • Paula

    I think you can pay off most of it and leave a low balance say $5 – $10 dollars. That way the bureaus see you are using the card but the utilization ratio is low. At least that’s what we were told.

  • Paula

    Also make sure to pay off the $5-$10 dollars before the time period of no interest on the purchase expires. I think that way you don’t have interest.

  • Paula

    This puzzles me that they cannot waive a fee (as in our case with capital one) since we agreed to the terms yet credit card companies can add an annual fee if they so choose. That’s just confusing! lol

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