Often people like to review their financial strategy at the beginning of each year and even though credit cards are usually opened at various dates throughout the calendar year it might be worth to see which ones are still needed.
Credit Card companies (especially in the U.S.) almost always entice their customers to open a new account with generous bonuses such as a high points/miles amount, a fee waiver or statement credit for the first year of card membership.
The ‘danger’ comes after that first year when people lose track of their obligations as far as annual fees are concerned, especially if many credit cards are in someones wallet.
Example: Last year I applied and received the Lifemiles Credit Card from Banco Popular that has a $149 annual fee but offered 60,000 Lifemiles for just a single transaction (I think I used the card just that one time for a parking ticket). I got my points and since then the card has been sitting idle in my drawer.There are no features associated with that Lifemiles Visa Card beyond the first year that would benefit me considering I never fly on Avianca.
Since the annual fee is US$149 which is rather steep I decided to downgrade it to the lower (cheaper) version or cancel it entirely if no fee waiver is offered. Calling the service hotline revealed the bank doesn’t offer product downgrades/changes or fee waivers in this case. While I was initially hesitant to cancel the account due to a very generous credit line (impact on credit score) I figured that alone isn’t enough to justify the high fee. I cancelled the account with the agent on the phone as no bonus was offered to entice me keeping the card for another year (many credit card companies do offer such bonuses but at the same time they aren’t stupid and see when someone doesn’t use the card).
I also cancelled my sisters Lufthansa Frequent Traveler Mastercard issued in Germany as the 64 Euro fee simply doesn’t outweigh the benefits anymore and got rid of a few other redundant cards as well – time to clean the slate so to speak.
Right now after cleaning house my main personal credit cards are:
- German issued Commerzbank Premium Visa/Mastercard Package with 25 Intl ATM withdrawals each
- German issued DKB Hilton Visa Card that offers Hilton Gold Status for 49 EUR per year
- U.S. issued Chase Hyatt Visa Signature with one free night per year for US$75 p.a.
- U.S. issued Chase IHG Rewards Mastercard with one free night per year for US$49 p.a.
- U.S. issued SPG Amex with 2 Stay Credits (or five night credits) each year for US$ 95 p.a.
- U.S. issued Amex Platinum Charge Card with various travel credits and a Priority Pass for $550 p.a.
Now that I cleaned up my portfolio a little I might wait if Chase ever brings back a generous sign up offer for the Sapphire/Sapphire Reserve but I’m not in a hurry.
Furthermore, American Express in the U.S. has the new Hilton Honors cards available since yesterday (John wrote about those here back in November) and especially the Aspire Card that comes with Hilton Diamond status, various travel credits and a Priority Pass is interesting (at US$450 a year). I don’t value Hilton Honors points much as far as the signup bonus is concerned considering how much it costs to book a really nice Hilton property on points but the card benefit are good.
The credit card market has endless offers for all needs (especially in the U.S.) and there are also factors that could speak against cancelling a card with a high limit, especially if it’s an old account to avoid taking hits on the credit score. I’m no expert on that but there are countless forums that handle such questions.
I’m more about the bottom line that says if a card has outlived it’s usefulness or there is a better product then it has to go. I don’t believe in applying for more, more and more cards leading to a huge bill in annual fees towards the end of the year, especially premium cards with several hundreds of dollar in cost and often duplicate benefits such as Priority Pass or Global Entry credit. You can just use one PP at a time and only need the Global Entry renewal every five years. Having these benefits multiple times has zero value.