“What most credit card consumers don’t understand is that almost everything is negotiable to a certain extent, and annual fees are no different,” says Scott Bilker, author of “Talk Your Way Out of Credit Card Debt” and creator of DebtSmart.com. “But you won’t know if it’s possible unless you give it a try and have a plan before you do.”
First figure out if the fee is worth it
Annual fees are often justified based on the rewards and benefits offered by the credit card issuer, and sometimes paying that fee is a worthwhile price of admission.
“There are circumstances where an annual fee is totally worth it,” says Beverly Harzog, credit card expert and author of “Confessions of a Credit Junkie.” “But each person needs to figure that out on an individual basis.”
For instance, Harzog points out that the Blue Cash Preferred Card from American Express (a CreditCardForum advertising partner) charges a $95 annual fee, but cardholders get 6 percent cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%) and 3 percent cash back on gas.
“If you’ve got a big family, you are going to rack up a lot of rewards with that card, and the $95 fee is probably worth it,” says Harzog. “Fees for cards with a really rich rewards program might be palatable for the right individual.”
You can also do some simple math to make the decision, Bilker says.
For instance, if you have a card with a $20,000 credit limit and a $50 annual fee, you’re only paying a quarter of a percent per year for the benefit of that enormous credit line, “which is totally worth it,” says Bilker.
Conversely, if you have a $500 credit limit and a $50 annual fee, you’re spending 10 percent of that credit line per year just to keep it open.
“The bottom line is you need to analyze your usage against the credit limit and the fee,” says Bilker. “If the numbers don’t add up to a good deal, you need to get that fee waived.”
Start with a basic request
Trying to get your annual fee waived begins with a courteous phone call to your credit card issuer. In some cases, says Harzog, they may agree to waive or reduce the fee based solely on your request. But before making the call, prepare yourself.
First, Harzog emphasizes, your chances of success are better if you’ve been a longtime cardholder, you consistently pay your bill on time and you’ve got an excellent credit score.
“If you’re going to try and get out of the annual fee you should be ready to mention these positive attributes,” says Harzog.
Second, do your homework. Let the card issuer know you understand how other credit card companies handle annual fees and clearly state your case as to why your issuer should waive the fee. If you’ve recently received no-fee offers from other credit card issuers, have those ready.
“Many people are surprised just how successful they are in negotiating this by simply having some basic financial knowledge and flat out asking to have their annual fee waived,” says Leslie Tayne, financial attorney and author of “Life & Debt.” “Doing a little bit of homework can go a long way.”
Third, be ready to list the specific ways you’ve been a loyal and valuable customer.
“Before you make the call you should know how much you use the card so you’re able to say, ‘Look, I spent $10,000 on this card last year and you’re making way more on merchant fees than from my annual fee,’” says Bilker. “That’s a strong negotiating point because if they won’t budge on your $50 fee you can tell them it’s the last $50 they’ll ever get from you.”
Finally, don’t be rude, angry or anxious.
“Being rude or threatening likely won’t get you anywhere. If you’re not happy with the answer you get you could always hang up and try calling again,” says John Ganotis, founder of CreditCardInsider.com. “Make sure you’re calm and collected, otherwise they might wonder why you’re so anxious to get rid of this fee and assume you’re in financial trouble.”
Let them know you’re willing to walk
Today’s credit card market is extremely competitive, and that means you probably have more leverage than you realize.
“The bottom line is that it’s a lot cheaper for credit card companies to keep existing customers than to bring on new ones,” says Harzog. “Most consumers don’t realize that.”
To that end, you may threaten to close the card if the issuer isn’t willing to budge on the annual fee.
“Saying you’d like to cancel or talking to the cancellation department may get you in touch with someone who has more authority to waive an annual fee,” says Ganotis. “However, choose your words carefully and don’t take it too far if you’re not willing to close the account, because if you actually ask to close the account they may just close it for you without trying to keep you as a customer.”
Another precaution: Don’t play the cancelation card if there’s a large balance on your account. If there is, you’re not in a good place to negotiate since you’d have to pay off that balance before closing the account anyway.
“The credit card company could assume that if you haven’t paid off your large balance yet that you’re not able to right now, so you wouldn’t actually be able to close the account,” says Ganotis. “Since you aren’t in a position to close the account, they would theoretically not have much incentive to waive your annual fee.”
Downgrade to a different (but comparable) card
If you’re not having success getting the fee waived, Bilker suggests asking your card provider to switch you to a different card that doesn’t have an annual fee.
“All you have to say is, ‘Hey, do you have a no-fee card that you could switch me to?’ You might be surprised what other comparable products they have,” says Bilker.
If you take this approach, Bilker says it’s critical that you ask them to close your annual-fee card and transfer the available credit limit to the no-fee card.
“When you do this it doesn’t hurt your credit score because your available credit won’t decrease,” says Bilker.
Ask for other offers
There’s no guarantee you’ll get an annual fee waived, especially for illustrious cards with fees north of $200. However, your issuer may offer you extra rewards in lieu of waiving the fee.
Ganotis says it may be much less expensive for them to give you reward points (or opportunities to earn more points) than to waive the annual fee. So you may be able to negotiate for additional value for your annual fee, even if you can’t get it waived.
“Personally, I’ve been offered thousands of extra rewards points this way,” says Ganotis. “I also had an issuer offer me 2X rewards points per dollar on certain categories for three months instead of waiving the annual fee. There are a lot of possibilities once you start inquiring about the annual fee.”