Annual Fee Chopping Block: Is It Time To Cut Down On Your Expensive Premium Credit Cards?

With 2020 obviously being a year of economic slowdown it could be a good opportunity to review the annual fees of the premium credit cards in your wallet and decide if they’re worth the price.

Especially cards with a travel focus have very little value if they come with a high price tag but you don’t actually travel a lot in the current/upcoming year.

Just short before the stock market crashed credit card companies have been flying high (maybe a bit too high) and decided to rack up the annual fees of their premium cards. Early January I wrote about Chase increasing the fee of the popular Sapphire Reserve Card to US$550 and a year before American Express also moved up the fee to the same level.

All these fees add up and even though each of these cards comes with specific benefits in the end you’re paying cash for all of these – even those you actually never use or would never use in the first place. Is it finally time to unclutter your wallet?

You can always call up your credit card company when your annual fee is due and ask if they will waive it for the coming year as you consider cancelling due to cost. This is called a retention offer and usually (if the bank feels like offering something) then it will be a waived fee or additional points, often after meeting a spending threshold.

Hotel credit cards are usually the easiest to justify if they come with an annual free night. Just that one night is worth more than the $49-$95 these cards cost per year and I’d say pretty much anyone stays at a hotel at least once a year.

But these premium cards for over $500 a year? Especially if you have several of them, many with duplicate benefits such as Priority Pass and Global Entry credit?

The problem here is that many sources out there are telling you how great it is to sign up for a new credit card because it’s essentially free after all these great benefits. But in the end you’re still out of $550 for a card membership. The benefit: $200 “Airline Credit” from Amex that’s horrible to use, $50 to spend at Saks Fifth Avenue every six months where some have enormous difficulty finding anything without paying even more on top. Lyft and Doordash benefits from Chase CSR!?

Consolidating the credit card portfolio and putting some expensive cards on the chopping block is never a good idea. One thing though: Based on what happened during the last financial crisis I’d suggest to consider if you really want to cancel a card with a large credit line. Banks might feels the squeeze this year and might get tight giving out new credit.

Even if you have a good score there is no guarantee you would get the same product and credit line back later if you wanted to. Sometimes you can move limits from one card to another and then cancel the card you don’t want anymore. That’s probably the avenue I’d go.

Conclusion

The online credit card world is all smoke and mirrors nowadays . Of course those trying to push out these cards including many travel blogs do it for a reason: Their own business interest. Over the years many became so reliant on this revenue stream that they recommend people to sign up for a dozen products a year.

Don’t drink the cool aid on these cards. Unless a credit product suits your spending pattern and financial profile I say dump it! It might be burning a hole in your wallet and often people don’t even realize it.