Should you keep, downgrade or cancel a credit card that has an annual fee?

When you have a credit card with an annual fee, you should evaluate every year whether or not the benefits of keeping the card are greater than the cost of keeping the card. This would seem to be an easy thing to do but there are many variables that need to be taken into consideration. A card that has great value to one person may be useless to another and therefore when reading posts about if a card it worth it, remember that Your Mileage May Vary. 

So what should you be thinking about when deciding if you should keep that card?

When you’re a couple like us and have over 20 credit cards between the two of you, the annual fees can start to add up quickly.  I’m sure the banks would love if I just kept paying the annual fees every year for all of my cards. But I’m not going to do that because there are always new cards, with better benefits, that I sign up for every year – and that makes some of the older cards redundant, so I drop them. I get some of these newer cards because of large sign up bonuses and I get others because I think they’re worth holding for the long term.  Each card has a particular number of benefits that are specific to it. Knowing these benefits and the value you give to each of them will help you make an informed decision about whether or not the card is worth keeping. Personally, I’ll try to break these down by category. To help me keep all the information together, I use a Excel spreadsheet that lists the annual fee and the date it gets charged, benefits I get from the card, and if I’ve received any previous offers to keep the card (I’ll explain this later). If I think I’m going to cancel the card, I highlight the renewal date so I can call the bank when the time comes.

  • Annual Fee (or lack thereof)

If you have a “no annual fee” card, my suggestion is to keep it, no matter what. These cards are valuable for, if nothing else, giving you a long lasting relationship with a bank. Banks like to see customers stay and they value how long you’ve had an account. The average age of accounts is also an important part of your credit score. So hold onto that free credit card you’ve had for forever (and use it every once in a while so the bank doesn’t close it on you).

For cards with annual fees, what you pay should be very easy to find out. To start, it would have been on the application for the card. If you don’t remember, a quick Google search will be your best friend. If your card waived the annual fee for the first year, as many of them do, you won’t be on the hook for any cash until the first renewal. While some banks will send a reminder that your annual fee is approaching , just as many of them do not and they’ll just add it to your bill. If this has happened, don’t worry. You have at least until the next statement, or maybe longer, to figure out if the card is worth keeping. Don’t procrastinate too long though, because some banks will not refund this fee after 30 days.

  • Card Benefits

While finding out the annual fee of a credit card is easy, putting a value on the card benefits can be much harder. Many websites will list benefits of a card with amounts for how much each one is worth. I find that these amounts can be highly variable (and usually are skewed to make the cards look like a great deal). It’s up to you to determine if the benefits are worth the annual fee.

I’ll give examples of how I figured out what the benefits of three cards that had annual fees coming due. I’ll then show what I did in each case.

I’ve used my IHG free night certificate at The Willard InterContinental – Washington D.C.

Annual Fee – Free for the first year and then $49 per year.

Sign Up Benefits – This card usually has a sign up bonus of 60,000 up to 80,000 points when meeting a spending requirement. As the card has no annual fee for the first year, there is no reason not to keep it until your renewal time.

Spending Bonus Categories – The IHG card earns 5 points per dollar at IHG hotels, 2 points per dollar at gas stations, grocery stores, and restaurants, and 1 point per dollar everywhere else.

Immediate Benefits – The IHG card give you immediate Platinum Elite status with the IHG hotel program. That allows you to get late check out (albeit only at the hotel’s discretion), access to a priority check in line, room upgrades and 50% point bonus for paid stays. The IHG card also gives a 10% rebate on point redemptions, up to 100,000 points back per year.

Benefits at account anniversary – On your account anniversary you are provided a free night certificate that is valid at over 5,000 IHG hotels worldwide

So that’s the basics of the card. It is worth keeping? I’ll go through all the factors but for me this is a no brainer.

I don’t put any real spending on this card.  I have other cards that give me better bonuses at gas stations, restaurants and grocery stores so the only great category is 5 points for IHG stays (I value IHG points at 0.575 cents so 5 points is worth 2.875 cents). I can get 3 points per dollar with my Citi Prestige card for hotel stays and those points are worth at least 1.25 cents each (3.75 cents/dollar).  So even at IHG hotels, it’s not the best card for earning points.

I find that with having Platinum Elite status I’ve occasionally received an upgrade to a really nice room or mini-suite. However since I’m usually staying at an Holiday Inn Express or Candlewood Suites for a short stay, this doesn’t really mean that much to me. It’s a nice perk but not something I put a huge dollar amount on.

The 10% rebate on points is something I can put a value on since I just purchased points for 0.575 cents each. If I redeem 100,000 points for a hotel stay, I’ll get back 10,000 points. I value that at $57.50.

The reason that keeping this card is a total no-brainer for me is the free night certificate. You can think of it as prepaying for a night at any IHG hotel (as long as there is award availability) for $49.  I can’t think of any hotels that you’d lose money at using this benefit.

Result – KEPT CARD

American Express Business Gold Rewards (BGR)

Annual Fee – Free for the first year and then $175 per year.

Sign Up Benefits – This card usually has a sign up bonus of 50,000 up to 75,000 points after meeting a spending requirement. As the card has no annual fee for the first year, there is no reason not to keep it until your renewal time.

Spending bonus Categories – The BGR card has a rather unique feature of letting you pick the category at which you receive the higher bonus. You can get 3 Membership Rewards points per dollar on your pick of:

  • Airfare purchased directly from airlines
  • U.S. purchases for advertising in select media
  • U.S. purchases at gas stations
  • U.S. purchases for shipping
  • U.S. computer hardware, software, and cloud computing purchases made directly from select providers

You then will receive 2 points per dollar in each of the other categories up to $100,000 in spending in each category. You will receive 1 point per dollar for anything over $100,000 in those categories and for all other purchases.

Purchases directly from Apple will earn either 2X or 3X points with the Business Rewards Gold card

Other Benefits – Like all other American Express business cards, you have access to benefits of the AMEX OPEN program. Most importantly, this includes a 5% rebate (or 2 additional Membership Rewards points) on money spent at select merchants like FedEX and Hertz car rental.

So is this card worth keeping?

I’ve held onto this card for a couple of years. For a while, it was my best earning card for airfare spending as I selected that for my 3X category. I also used it for purchases from Apple to earn 2X points. More recently, some of my other cards have matched or started to give greater returns for airfare spending (the American Express Platinum card now gives 5X points for airfare purchases directly from airlines). For the minimal amount of spending we do in the other categories, I couldn’t justify paying the annual fee.

We called American Express to speak to the account retention department before cancelling. This department is there to try to keep you from cancelling your account. They will occasionally offer account credits to offset the annual fee, bonus points or other incentives, which may or may not make reconsidering a possibility. You can check on FlyerTalk to see what offers other people have recently received from the bank to keep the card. However, when we called we didn’t receive any offers.


Chase Ink Bold Business Card

Please note this card has been discontinued and is no longer open for applications. It has been replaced by the Ink Preferred card. 

Annual Fee – $95

Spending bonus Categories – The Ink Bold card has some wonderful bonus categories. You earn 5 Ultimate Rewards points per $1 on the first $50,000 spent at office supply stores, and on phone, internet and cable TV services. You also earn 2 points per dollar on the first $50,000 spent at gas stations, as well as on hotel accommodations (when paid directly to the hotel). All other spending earns 1 point per dollar.

Other Benefits – The Ink Bold offers primary car rental coverage. This means that if you have any damage due to theft or collision, you don’t have to go through your own insurance first. It should be noted that because this is a business card, this coverage is only good for car rentals for business use.

So is this card worth keeping?

The Ink Bold is a major part of my points earning strategy. I am able to pay for phone (land line [when we had it] and cellular) and our cable/internet bills each month and earn 5X for those monthly bills. I also occasionally use the 5X benefit to buy things at Office Depot or Staples.  I could do better with other cards I have for the other 2X categories. I don’t use the Ink Bold for car rental because our car rentals are usually for pleasure trips and I have similar coverage with the Sapphire Preferred card without the business use restriction.

I’ve held onto this card for several years but I’ve read about how you can get many of the same benefits without paying an annual fee. The way to do this is to downgrade the Ink Bold to the no annual fee Ink Cash card. If you ask, Chase may allow you to change your card without having to submit a new application.

I sent a secure message to Chase from their website asking to downgrade my card (thanks to Greg at Frequent Miler for instructions on how to do this online). After some back and forth with legalese forms, I was allowed to change to the Ink Cash card. So what’s the difference?

The Ink Cash card bonus categories are the same for the 5X categories. You earn 2X points for spending as gas stations and restaurants (instead of hotels) and 1 point for all other spending. The spending categories are also capped at $25,000 instead of $50,000. Another difference is that the Ink Cash points are redeemable for cash and not transferrable to airline or hotel programs. However, if you have another Chase card that earns transferrable Ultimate Rewards (like the Sapphire Preferred) here are instructions on how you can transfer the points from the Ink Cash to your other Chase card and then transfer them to the airline or hotel.

Since I have a Sapphire Preferred card, I decided to downgrade to the no-fee Ink Cash card.


Three cards, three different results. I’m starting to take a closer look at the cards I have. They need to be making a contribution or off to the shredder they go.

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3 thoughts on “Should you keep, downgrade or cancel a credit card that has an annual fee?”

  1. Just came across this while Googling around for info on Amex Business Golds Reward, which I picked up about a year ago, but (like you) can’t see any point in keeping when the AF hits, absent a retention offer I am unlikely to get. Just got the IHG card for a trip this summer, and it has already paid out like a bandit. I agree, that’s a keeper. Finally, you did a great job summarizing how to downgrade Chase Ink Bold Business card. I’m finally under 5/24 with Chase, so will get Sapphire Preferred just before the Ink downgrade, so I can keep changing those 5x UR points to Hyatt points. (We have a jones for the Park Hyatt Vendome.)

    Anyhow, rare to find such a timely and useful post … with such great font and spacing, too. If you got the Amex Business Platinum last year, too, I’d be interested in your thinking on that one….


    1. Thanks for the nice comments about the post.
      If closing the AMEX biz gold card, Just make sure you have another MR card from AMEX before cancelling.
      I Don’t have Business Plat anymore, had it before but downgraded to Green card. Hoping for an upgrade offer without the prior cardholder language but no luck so far.
      I’m keeping my personal plat card because of access to Centurion lounges. Still evaluating if that’s still worth it to me. 5x for airfare is great but is it worth the extra fee when I get 3x from CSR??? I don’t spend THAT much on airfare.


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