In fact, I’ve now seen lists of people saying which cards they are keeping, and listing 20+ cards each with fees from $89 to $450 a year. That is insane. Easily $2,000 in annual fees for credit cards. Money that could have gone to flights that go places and earn miles/status.
As I commonly say, “you can go broke saving money”. For me, a great example of that is people who have a ton of credit cards they pay annual fees on. Seriously, it adds up. Even if you just keep a card for one extra year, that alone would add up. But keeping cards for a ton of years, think about how much money you’ll spend vs the benefit.
Nearly all credit cards offer a ton of upfront value, and many of them attempt to give annual benefits. But I find most annual benefits not worth the costs. Period.
In order to keep a card I need 2 of 3:
- Good annual benefit
- Good earning from spending
- Low annual fee
I could imagine paying a large annual fee for large benefits, but these aren’t “large benefits” for me.
From my perspective, there are three categories of cards with annual fees. “Not even close to worth it”, “still not worth it” and “barely worth it”.
There could be exceptions, of course. Like someone with the AA card who doesn’t have another one, but would spend enough miles that the 10% miles back benefit would give great value. There are almost always exceptions, but they are few and far between, in my opinion.
Keep, Cancel, Downgrade, Retention
Of course it’s not always black and white. You don’t always have to keep or cancel. Sometimes when you call the agents will offer extra bonuses to keep the card. I almost always decline unless it’s to waive the annual fee. I just don’t want to pay to have a credit card. Ridiculous. But also some allow you to downgrade to more basic versions of the card when they exist. I would do that if I can have a no annual fee version of the card.
Credit Card Annual Fees “Not Even Close To Worth It”
While this category is by far the largest category, I’ll try to be nice and pick on cards with really bad values.
The most obvious would be cards that have little/no annual benefit but high annual fees:
- Chase Sapphire Preferred – $95 annual fee
- Amex Premier Rewards card – $175 annual fee
- Gold Delta – $95 annual fee
Then there are cards with really terrible annual benefits and high annual fees. Most common are cards that just give club lounge passes:
- United Explorer – $95 annual fee – 2 club lounge passes
- British Airways – $95 annual fee – rip off of a companion pass
For most of these I don’t see why anyone would pay it. Would you pay $95 for two club lounge passes? No. You would be out of your mind. (Mine don’t even get used). So why then pay $95 for two club lounge passes? Seriously.
Then there are cards that I would put on the list, but I wouldn’t make it such a hard rule to put on the worthless list. For example the Ink Plus could have spending value at 5x on office supplies. Without regular spending on the 5x bonus, why keep the card? It’s just a normal card at that point. Or the SPG card is the only way to get SPG points really.
None of these cards have any value without major spend, and even then, most don’t have any value over other cards that might have no fee or also have benefits. There cards have no competitive edge, just enticing sign-up bonuses.
Credit Card Annual Fees “Still Not Worth It”
There are many cards that are often justified as “keep cards” but I really question how great the benefit is.
Most hotel cards fit this bill. They offer a free night at a restricted number of hotels when you pay $75+. The reality is that the restriction is often for hotels that I wouldn’t pay more than $100 for.
- Marriott card – $85 annual fee – free night at category 1-5
- Hyatt card – $75 annual fee – free night at category 1-4
The exception here could be the Hyatt card. We personally canceled it after 12 months had lapsed and then realized the $75 bill. We weren’t using the card and I honestly wouldn’t pay $75 for the night, I generally aim for $20-$30 a night averages via good rewards programs. See 6 ways to get amazing hotel deals.
However, if you travel a ton, you could run across Hyatt properties worth more than $75. For example we used our category 4 cert at the Grand Hyatt Muscat and it was seriously going for $500 a night. Apparently there was a big event, but it was over $350 on all the other dates I checked anyways.
But I would be lying if I said I saved $500 a night. I could have stayed at more IHG hotels to get more IHG points and spent that night at the InterContinental. I could have done the other amazing hotel deal opportunities. Although, I was grateful to have the free night at the Hyatt, I wouldn’t recommend buying a $75 free night certificate. I don’t like paying that much money, and most people can use other points, or won’t find hotels that will give significant “value” back.
For most people the American Airlines cards aren’t going to be worth it. 10% back is great if you’re burning a ton of miles. But there are always other AA cards and having more than one doesn’t give you 20% back. Most likely you should get rid of that sucker.
Credit Card Annual Fees “Barely Worth It”
Let me list them all:
Kidding… but almost not. Seriously, I can think of one card that I absolutely love.
IHG MasterCard. It’s the perfect combo. A low $49 annual fee and the huge benefit of a free night at any one of IHG’s hotels.
Before the devaluation I would definitely say that the Club Carlson card was worth it, both for the benefit and the bonus, but now it’s probably on the scrap list.
Personally, any card that is giving you 5x on a spend you can actually make use of is worth keeping. Like the old Amex Blue card (that’s dead now?) that gives 5% cash back but has a $75 annual fee. You could make that back easily in one $2,000 trip to CVS.
Any no annual fee card. The Chase Freedom card is a sweet card that I’ve had since 2008. The sign up bonus is tiny right now, but it gives a capped 5 points per dollar on rotating categories and has no annual fee. So… yea… My budget for the cards to keep list is $0. That’s always a good price.
Seriously people. Write down all the cards you think you might keep this year and add up how much money that would be. Add it up.
I’m not saying don’t keep any cards, just think about how much money you would gladly spend on having the bonus. And if you think “I’ll probably use this card a ton”, ask yourself how many cards you need to have as daily spenders?
Basically, don’t spend money on benefits you won’t use, even if it’s in the form of credit card annual fees.