Should I Pay An Annual Fee?
After you’ve been opening up new credit cards for their Sign Up Bonus points for a while you’ll be questioning if you should keep the card open and pay the annual fee each year. We will go through if it makes sense to keep the card and pay the fee, downgrade the card to a no annual fee card or cancel it!

When it comes time for the annual fee to post on a credit card you essentially have three options. Remember, we always want the first annual fee to post on a new credit card before you do anything. It is essential to keep a credit card open for at least a year so credit card merchants don’t claw back any points etc.
Usually you have 30 days from when an annual fee posts to make a decision on what you are going to do with that credit card. Companies usually refund the annual fee if you choose to downgrade or cancel the card within 30 days. This is not 100% fool-proof, so check with the bank to make sure.
3 Options
- Keep Your Card
- Change Your Card
- Cancel Your Card
Keep Your Card
The first option is to keep you credit card and pay the annual fee. In some instances this makes sense because the cards are just worth keeping. For example our favorite beginner card, the Chase Sapphire Preferred® Card, is worth keeping open and has a $95 annual fee. This card opens up all kinds of transfer partners and I move all my Chase points to it to use these features.
Another reason is that you find the perks outweigh the annual fee cost. An example of this for me is the Capital One Venture X Rewards Credit Card card with a $395 annual fee. I get a $300 travel credit for their travel portal to use each year. I often times use this on rental cars for vacations. I’m going to pay for this anyways so I use the credit for this. That brings the fee down to $95 a year. On top of that it has Priority Pass for lounges so I figure that’s definitely worth $95! This card is also my go-to card between Sign Up Bonuses because it earns 2X points on every purchase.
Change Your Card
The next option is to change your card or “downgrade” your card to a card in the same family with no annual fee. No all cards can be downgraded, but a lot can. To downgrade means to change to a no annual fee card. This can also be called a “product change”. A reason to do this is because you do not loose the credit history for this account like you would if you cancelled the card. It keeps the credit history that was tied to the original card.
One thing to double check is if the downgrade counts as a “new account”. Usually this it does not, but there has been some reports that Citi has done this recently. Always inquire if they with do a credit inquiry when you downgrade the card.
Cancel the Card
The last option, if you cannot downgrade the card, is to cancel the card. This comes into play when you are not getting enough value out of the perks of the card to offset the annual fee cost. If you choose to do this make sure you have other long-standing credit cards that are open to offset the credit history you will loose by cancelling the card.
If you have several cards, cancelling a card should only temporarily drop your credit score by a few points.
How to Change or Cancel Your Card
This is super simple to do. All you need to do is call the number on the back of your credit card. Let them know you’d like to downgrade or cancel the card because you don’t want to pay your annual fee. Usually they will try to convince you to pay it and keep the card open by offering bonus points or a statement credit. If you feel like this makes sense then go for it, but usually it makes sense to go through with your plan.
Will I Loose My Points?
Word of caution that when you cancel a card you might loose your points so make sure to know if you will!
If you have a bank rewards card like, Chase Sapphire Preferred® Card, American Express® Gold Card, Citi Strata Premier℠ Card etc., you will most likely loose your points when you cancel or downgrade, so if you have a lot of points currently it might make sense to keep your card and pay the annual fee. Remember if you have another account or your family member does with of the same kind you can usually merge those points and then cancel the card to keep your points. If you want to cancel, don’t have anyone to transfer points to another option is to convert your points to cash or gift cards before canceling.
For co-branded cards like, Southwest Rapid Rewards® Priority Credit Card, Delta SkyMiles® Gold American Express Card, United Explorer℠ Card etc., those points are tied to the loyalty program not the credit card, so you can cancel these cards at anytime and not loose the points.
If You are Currently Getting a Loan
We do not recommend canceling your credit cards if you are in the process of getting a loan or mortgage because it will change your credit. It may only knock down your credit by a few points, but some lenders don’t like to see any changes at all while processing your loans.
The Wrap Up
Remember to download our favorite app Travel Freely to help you keep track of your credit cards. It will even notify you when the annual fee is going to hit so you can assess what you want to do with that card!
For Capital One products listed on this page, some of the above benefits are provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply.
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