If you are planning to cancel a card due to an upcoming annual fee that you don’t want to pay, you may find it harder than you think to get rid of it. Typically, when you call up the card company to cancel instead of sending you to the ‘Credit Card Cancelling Department’ they instead send you to the ‘Credit Card Customer Retention Department’.
The thing is, providing you are OK with keeping the card, it is often best to not cancel, since it is good to keep a card on your credit history and keep your credit score higher by both maintaining Age of Credit Line and Percentage of Total Credit used. However an annual fee often trumps that in terms of priority so it is why people decide to shut down. You are about to enter into a negotiation, and whenever you do this you need to know your BATNA (Best Alternative To Negotiated Agreement) before you engage in talks.
Here are my tips to prepare you for the call:
- If they waive the annual fee keep the card, it is free again now, make a note of it in your calendar ready to watch in a year from now.
- If they flat out refuse to waive the annual fee or offer you anything in exchange for this don’t actually cancel the card, but ask to transfer the as much of the limit you can onto a fee free card, or another card from the same bank that you have. I did this with my Chase British Airways Card when I shut it down and moved it to my Chase Sapphire Preferred Card. Whenever possible do not lose your overall credit line.
- Be ready for the sweetner.. often the Rep will not offer to waive the fee but will offer to give you some points to keep your card. This can be a flat out payment of points for keeping it open and paying the fee, or it could be accelerated earning potential. The former is easier to calculate in advance, the latter is more difficult, but I wouldn’t typically go for it unless they offered me a 5x multiplier.
When you are being offered a points deposit in exchange for keeping the card open and paying the fee you are just buying points for that amount, therefore you should go into that call knowing what your price point is for an agreement, you shouldn’t have to panic and think on the spot. Everyone does value points differently, which confuses people but here is an easy solution.
You are buying points. Just take the price you could otherwise buy them for, and see if you come out ahead, lets break that down using the cost of the annual fee per card.
Cancelling American Express
Amex is unique among the card providers in the way it treats its card families. Whilst Citi and Chase also offer both an internal points program (Citi Thank You Points and Chase Ultimate Rewards) along with their co-branded cards (think airlines, Citi’s premium airline being AA, Chase has United. Amex segments its card family in a special way, which is important to know when seeking a card downgrade (should the retention offer not be acceptable).
I have highlighted the 7 Card Families of Amex above in this chart, as an example of how it would work:
Calling to cancel the Amex Platinum Card, the retention offer is unacceptable, so a downgrade is offered. You cannot downgrade outside of family, so your options are to accept the Gold or the Green Amex. Similarly if you were calling to cancel the Hilton Surpass you could only downgrade to the Hilton Fee Free card – you couldn’t swap a line of credit outside of the family and ask for the Surpass line of credit to be transferred to a new Amex Blue Cash Card.
- If you do downgrade within the Membership Reward family (Amex Plat>Amex Gold>Amex Green or Mercedes Benz Plat>Mercedes Benz Standard) you keep your Membership Rewards account active and there is no need to worry about spending up your points balances.
- There are two cards that don’t downgrade – the Amex Starwood’s SPG, and the Amex JetBlue card.
- They told me it wouldn’t be a hard credit pull to downgrade, but I am not totally sure I believe them on this, they do ask salary questions and I think at minimum you are getting a soft pull, possibly more. Factor that in if you are applying for more credit in the near future.
Knowing your BATNA
You need to know the number of points/miles required to keep you with the card in the event that they do not waive the fee, but instead bandy around a random number of points. In the case of Amex I took two numbers for perspective, one is the cost to flat out purchase the points, and the other is my perceived value when assessing the worth of the points offer I think it is naive to accept the price they arbitrarily assign to the cost to purchase the points, because they certainly are putting profit on top of value here. Therefore I also provided what I think they are worth.
This number should be different for everyone. I put Membership rewards at the value I would rate for their Transfer to British Airways Avios. I then multiplied that number by 1.25 for SPG points since they transfer to the same British Airways Avios at a 1:1.25 ratio.
I broke my formula for just one card, the Amex Surpass. My value per point is 0.5 cents for that card, so the annual fee should be worth 15,000 points if I am using my methodology, but because the hotels that I stay in start at 50,000 an upwards at the moment I don’t value 15,000 high enough to pay a fee for. Therefore I just doubled the number as I would accept that 30K to be a good contribution towards a free night such as my upcoming stay at the Panama City Waldorf Astoria (50K per night). or similar property.
You have decide yourself on what the BATNA is, and if you value these points differently.
Lastly – don’t worry if you ‘missed the deadline’ on cancelling the card, all the issuers will allow a grace period where you can call in and say ‘I just saw the fee of X on my statement, please cancel’ when it comes to Amex they will also pro-rate your fee for the year which is especially handy for the large annual fee that comes with the Platinum card. For other cards it is typically 1 month from seeing the fee.
Pro Tip – sign up for an account with Personal Capital (my affiliate link is below) to track your Credit Cards and your Savings all in one place, they will send you an alert when you have a fee and you can use that prompt to call in and negotiate a retention offer, downgrade within the family, or cancel your card.