Your 4 Best Options When a Credit Card’s Annual Fee Goes up

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Your 4 Best Options When a Credit Card’s Annual Fee Goes up

Million Mile SecretsYour 4 Best Options When a Credit Card’s Annual Fee Goes upMillion Mile Secrets Team

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Unfortunately, banks can increase credit card annual fees as long as they give you 45 days’ notice.

Million Mile Secrets reader, Mahendra, emailed:

I’ve had the United MileagePlus® Explorer Card since 1995 and just got a letter that the annual fee is increasing from $85 to $95.  I have the option to reject this change.  But if I do, it says they will close the account.

This has been a great card for me because I receive legacy perks, which are not available to new cardholders.  For example, I still earn 2 United Airlines miles per $1 for dining, gas, groceries and entertainment.  This is my primary card and I earn lots of miles, which I use to book award flights to India.  Do you have suggestions on a better credit card to earn miles?

Even a small fee increase can be frustrating to frugal folks like me.  But this can be an opportunity to evaluate the perks of the card to see if it’s worth keeping.

Increasing Credit Card Annual Fee
Don’t Let an Annual Fee Increase Make You Sad! It’s an Opportunity to Evaluate the Card Perks and Consider Making Changes

I’ll share an action plan for folks deciding what to do after getting a credit card annual fee increase notice.

You Have Time to Make a Decision When Your Card Annual Fee Is Increasing

You don’t have to rush to make a decision after getting notice of an  annual fee increase.  Because the bank will notify you at least 45 days before the increase happens.

Increasing Credit Card Annual Fee
When You See an Annual Fee Post, You Have Some Time to Make a Final Decision

Plus, once you see the annual fee appear on your billing statement, you’ll still have until the payment due date to call the bank and close the account without having to pay the fee.  Some banks will even prorate the annual fee if you close your account after paying the annual fee.

But consider these tips before cancelling your card.

1.   Do the Current Card Perks Offset the Increased Annual Fee?

Certain cards have valuable perks that make them worth keeping, even with an increasing annual fee.  But this can depend on your personal situation.

Increasing Credit Card Annual Fee
Having Exclusive Access to Certain United Airlines Award Seats With the Chase United MileagePlus Card Can Make the Card Worth Keeping

For example, Chase United MileagePlus Explorer cardholders get access to more award seats than folks who do not have the card.  This can be an extremely valuable benefit if you book award flights.  For example, finding a low-level award seat can save you tens of thousands of miles on certain award flights.

And depending on your spending habits, the rewards you earn for everyday purchases might also offset any increase in the annual fee.  Mahendra likes earning 2 United Airlines per $1 on spending in certain categories.  She might not get the same earning potential for her spending with another card.

2.   Call the Bank and Ask for a Retention Offer

Banks don’t want to lose credit card customers, especially loyal long-term cardholders like Mahendra.

So if you’re disappointed to see an annual fee increase, I’d suggest calling the number on the back of your card and asking for a retention offer.  Sometimes banks will offer a statement credit or bonus miles as an incentive to keep the card open.

There’s a FlyerTalk thread with data points on retention offers for different cards.

Increasing Credit Card Annual Fee
Bonus Miles From a Retention Offer Can Top off Your Frequent Flyer Account and Put Your Next Award Flight Within Reach

I can’t promise the bank will offer anything.  But it never hurts to call and ask!

3.   Consider a Different Travel Card

My favorite cards for folks looking to have travel flexibility are Chase cards that earn Chase Ultimate Rewards points.  Because you can transfer these flexible points directly to terrific airline and hotel partners like United Airlines and Hyatt.

My top pick for beginners to miles & points or folks who haven’t opened a new card in awhile is the Chase Sapphire Preferred.

With this card, you can earn 50,000 Chase Ultimate Rewards points after you spend $4,000 on purchases in the first 3 months from account opening.  That’s worth $625 in travel when you redeem points through the Chase Ultimate Rewards portal.  And potentially much more if you transfer points directly to travel partners.

Transferring points to United Airlines can be a great way to book award flights to India.

Increasing Credit Card Annual Fee
You Can Transfer Chase Ultimate Rewards Points to United Airlines and Book an Award Flight to India!

With the Sapphire Preferred, you’ll also earn 2X Chase Ultimate Rewards points per $1 spent on travel and dining purchases.

And the card’s $95 annual fee is waived the first year.  So it’s basically free to try for ~12 months!

Once you see how valuable Chase Ultimate Rewards points can be, you can apply for other Chase cards that earn the same points to boost your account balance.  Here are some other cards to consider:

  • Chase Sapphire Reserve 50,000 Chase Ultimate Rewards points after you spend $4,000 on purchases in the first 3 months from account opening.
  • Chase Ink Business Preferred Credit Card – 80,000 Chase Ultimate Rewards points after you spend $5,000 on purchases in the first 3 months from account opening
  • Chase Freedom – $150 bonus (15,000 Chase Ultimate Rewards points) after you spend $500 on purchases in your first 3 months from account opening

The information for the Chase Freedom has been collected independently by Million Mile Secrets.  The card details on this page have not been reviewed or provided by the card issuer.

And each card has different bonus spending categories, which means you can make purchases with the card that earns you the most rewards.  Here’s my post with the ultimate Chase card combo.

Just keep in mind, you’re unlikely to be approved for most Chase cards if you’ve opened 5+ cards from any bank (NOT counting Chase business cards and these other business cards) in the past 24 months.

4.   Downgrade to a No Annual Fee Card

For folks like Mahendra who’ve had a card for 20+ years, downgrading to a no annual fee card can be a better than closing your account.

Because when you downgrade, all your existing account information transfers to the new card, including the account number, credit line, payment history, and length of time you had the card open.  And length of credit history is a factor in calculating your credit score!

Keep in mind, not all cards are eligible to downgrade.  And downgrading is not automatic.  The bank will review your account for eligibility.  And you’re usually required to have the card open for 1 year before making a change.

Bottom Line

Credit card annual fee increases are disappointing.  But there are alternatives to keeping the card open with the higher fee or cancelling the card, like:

  • Call the bank and asking for a retention offer.  Extra miles or a statement credit can make the card worth keeping
  • Apply for a different travel card that earns flexible points, like the Chase Sapphire Preferred
  • Downgrade to a no annual fee card to keep your length of credit history

And depending on your personal situation, certain cards can be worth keeping, even if the annual fee increases.  For example, the Chase United MileagePlus Explorer card gets you access to more United Airlines award seats.  This can potentially save you thousands of miles when booking an award flight.

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Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

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