How to Earn Lucrative Sign-Up Bonuses Without Paying Annual Fees Out-of-Pocket

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I’ve written why even thrifty folks like me should consider annual fee cards.  Because these cards often come with big sign-up bonuses and great perks that can help you achieve your travel goals!

That said, I understand folks new to our hobby might not be comfortable paying an annual fee expense.  Team members Keith and Scott remember feeling this way when they first started out.  And now they each have 8+ cards with annual fees.  

But there’s a strategy you can use to earn valuable sign-up bonuses on certain annual fee cards without paying the fee out-of-pocket.

Ways To Offset Credit Card Annual Fee

Get Big Travel With Valuable Sign-Up Bonuses on Certain Chase Ultimate Rewards Cards Without Paying an Annual Fee Out of Your Pocket

I’ll explain how you can offset annual fees with certain credit cards!

Why Get an Annual Fee Card?

Link:   Why Even Thrifty Folks (Like Me) Should Consider Annual Fee Cards

No annual fee credit cards are a great place to get started in the miles & points hobby.  Because you can keep these cards forever, which is a great way to build a relationship with the banks and increase your credit score.

But once you get your feet wet, annual fee cards offer an opportunity to earn lucrative sign-up bonuses quickly.

Then, you can redeem miles or points from the sign-up bonus for unforgettable adventures, like Emily’s mother-daughter trip to Paris.

Ways To Offset Credit Card Annual Fee

Emily and Her Mom Used Miles & Points Earned From Annual Fee Cards for a Memorable Trip to Paris!

Sometimes banks waive the annual fee on certain cards for the first year as an incentive to try the card to see if you like the perks.  For example, the $95 annual fee on the Chase Sapphire Preferred® Card is waived the first year.  This is one of the reasons it’s my favorite card for beginners.

There are also several annual fee hotel credit cards with free nights on your card anniversary.  As long as the value of the free night is worth more than annual fee expense, you’re ahead of the game!

Offset Credit Card Annual Fees

Link:   Beginner’s Guide to Using Flexible Points for Big Travel With Small Money

It’s possible to wipe out the annual fee on certain cards that earn flexible points by redeeming the points for cash back or a statement credit.

For example, the Chase Ink Business Preferred currently has an 80,000 Chase Ultimate Rewards point sign-up bonus after you spend $5,000 on purchases in the first 3 months of opening your account.

The card has a $95 annual fee, which is NOT waived the first year.

To get the most value from the bonus, I normally recommend transferring Chase Ultimate Rewards points to travel partners like Hyatt, Southwest, or United Airlines.  But if you’re looking to keep extra cash in your pocket by NOT having an annual fee expense, you can redeem Chase Ultimate Rewards points for cash back.

Your points are worth 1 cent each toward cash back.  This means you can redeem 9,500 Chase Ultimate Rewards points for $95 cash back, which is the amount of the Ink Preferred annual fee.

Ways To Offset Credit Card Annual Fee

You Can Redeem Chase Ultimate Rewards Points for Cash Back on Cards Like the Ink Business Preferred. This Is a Way to Avoid Paying the Annual Fee Out-of-Pocket

If you’re a new cardholder and use this method after earning the sign-up bonus, you’ll still have 70,500 Chase Ultimate Rewards points left over (80,000 point sign-up bonus – 9,500 points to offset annual fee).  Remember, you’ll also earn points from the spending you did to unlock the sign-up bonus.

Keep in mind, this strategy is best for folks who meet minimum spending requirements before the end of the first billing cycle.  Because the annual fee usually shows up on your first statement.  So you’ll want to have the sign-up bonus points in your account already to avoid paying the annual fee out-of-pocket.

Otherwise, you’ll have to pay the annual fee and redeem points for cash back later on to offset the expense.

The remaining ~70,500 Chase Ultimate Rewards points are more than enough for 2 free award nights at top Hyatt hotels, like the Park Hyatt New York where team member Jasmin recently stayed.  An award night costs 30,000 Hyatt points per night.

Ways To Offset Credit Card Annual Fee

You Can Redeem Points From the Ink Business Preferred Sign-Up Bonus for Cash Back to Offset the $95 Annual Fee and Still Have Enough Points Remaining for 2 Free Nights at the Park Hyatt New York

Remember, the Ink Preferred is a small business card, which means you must have a for-profit venture to qualify.

That said, you can use this trick with other Chase Ultimate Rewards cards with annual fees like the Chase Sapphire Preferred and Chase Sapphire Reserve.

And this method works the same for Citi ThankYou point cards like the Citi ThankYou® Premier Card.  Because these flexible points are also worth 1 cent each toward cash back.

But I would NOT recommend this strategy for AMEX Membership Rewards cards.  Because you do NOT get a favorable ratio when you redeem these points for cash back.

Bottom Line

There are many reasons to consider credit cards with annual fees, including the ability to earn lucrative sign-up bonuses, which you can use toward Big Travel!

If you’re looking to avoid annual fee expenses, you might consider certain annual fee cards that earn flexible points.  Because you can redeem points from these cards toward cash back, which can offset the annual fee.

For example, the Ink Business Preferred comes with an 80,000 Chase Ultimate Rewards point sign-up bonus after meeting spending requirements.  This card has a $95 annual fee.  But you can redeem 9,500 Chase Ultimate Rewards points from the sign-up bonus for $95 cash back, which completely wipes out the annual fee.  And you’ll still have at least 70,500 points remaining to transfer to Chase airline and hotel travel partners.

Keep in mind this strategy is best for folks who make a large purchase in the first billing cycle to meet minimum spending requirements.  Because the annual fee appears on your first statement.  So you’ll want to have the sign-up bonus points in your account already to avoid paying the annual fee out-of-pocket.

Do you ever redeem flexible points for cash back to avoid paying a card’s annual fee out-of-pocket?

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10 responses to “How to Earn Lucrative Sign-Up Bonuses Without Paying Annual Fees Out-of-Pocket

  1. I consider any money earned from Amex offers as a way to get back the money spent on annual fees.

  2. In your article, you mention someone having 8-9 credit cards. how many is too many cards ? i own several businesses and have a card for each but i could handle more. However, i only have 4 or 5 cards because i’m afraid the credit card companies will “block” me from receiving future cards & bonus points so i don’t push it.

    your thoughts ?

    • I know people with 40 cards. My wife and I have a total of 23 active cards, but we’ve had over 40 total in the past few years. Just be aware of the Chase 5/24 rule, the Citi 24 month rule and the Amex once in a lifetime bonus. Some banks may decline you if you have too many recent inquiries. Barclay is one of these. If you apply for 10 cards in one month you may start getting declined. But if you spread it out you can end up with a decent amount of cards and points in a year(though Chase would decline you once you reached 5). Just read about all this stuff on all these blogs and come up with a plan. The people who start getting declined are those that apply without planning.

      • thanks Scott, how do you have 23 active cards (up to 40) ? are these all bonus points cards? i don’t know about chase 5/24 rule or citi 24 but i will read up on it.

        i wonder if chase looks at my business having the card or my personal Social security number ??

    • @jim – Scott shares some terrific points above. Certain banks have card limits or application rules that can make it harder to get approved for lots of their cards in a short timeframe. But spreading out applications and applying for cards at different banks can help you earn new card sign-up bonuses. Remember, many small business cards do NOT appear on your personal credit report. Here are some posts you might find helpful:

      http://millionmilesecrets.com/2016/05/31/if-you-dont-know-this-amex-secret-youre-missing-out-big-time/

      http://millionmilesecrets.com/2014/08/24/when-to-apply-for-credit-cards/

      http://millionmilesecrets.com/2017/02/23/best-travel-credit-cards-2017/

      • thanks guys for all your help. just curious how many points do alot of people on here have ? i have 500k pts and feel i’m doing pretty good but sounds like many are blowing that away …….

  3. I use to do it like above but I’m ridiculous – might even get Blacklisted.

    Paid annual fee on, Schwab Platinum, regular AMEX Platinum, US Bank Altitude, Citi Prestige, Chase Sapphire Reserve.

    With the double dipping on airline benefits and Uber credits It’s basically a wash and you don’t tick off the banks

  4. James Lambert

    Darius, I don’t know if you know it or not but with the Citi AAmerican card when you call to cancel the card they always ask why. For my wife and I both we told them that we didn’t want to pay the annual fee. They made us both an offer that if we spent $95 using that card within the next 30 days they would credit our account for $95, hence deleting the fee!! The representative used exactly the same words when my wife called to cancel her card two months after I did mine. They obviously our reading from a prearranged program to keep customers.

  5. James Lambert

    Oops, I meant the AAdvantage card for American Airlines.