Someone in the Facebook group said that they were having a problem with “knowing which cards to keep and continue paying annual fees on.”
If Kenny Rogers was a travel hackers, perhaps he would have sang “You gotta know when to hold them, know when to churn them, know when to product change, when you’ve got the SUB”
This is mostly a personal decision but my advice is to always keep a Sapphire since you’ll need that to transfer points. Other than that, you have to decide if a card with a AF provides value. For example, the Hyatt personal card gives you at FNC each year so that alone is worth more than the AF. If you regularly stay at Hyatts, the card will provide plenty of other benefits as well. That’s a no-brainer for most. But not every card has such perks so you have to do the math.
Before we go any further, I have to stress that you should NEVER cancel a card before the one year is up. That is a great way to ruin your relationship with that bank. Instead, wait until the annual fee hits. Then you can decide how to move forward. I’ll circle back to this in a bit.
Running the numbers
If you have an airline card that gives you free checked luggage and you utilize that at least 3 times a year, you’ll come out ahead by a few dollars. Anything after 3 times will provide even more value. Annual fees are usually about $95 and checked bags are $35 now. So if you check a bag on two round trip flights, that’s $140. Again, no brainer. However, some people have status and therefore get checked baggage for free anyway which would make that perk completely worthless.
Conversely, if you don’t check luggage that much, the card may not provide any value. The United Explorer card also provides two free one time passes. Can you actually use them each year? And do you check luggage at least twice? If you do, you’ll coming out ahead. Anyone with that card knows that actually using a OTP can be very, very difficult. Therefore, I wouldn’t put a ton of real value in that. Maybe $30.
Of course, some cards have other benefits as well that you may or may not need such as PreCheck and Global Entry credits. Since you don’t need those every year, it may not be helpful. Priority boarding is another perk that may or may not be valuable to you.
Regardless of how you do the math, the math should dictate your decision here which is the case for a lot of travel hacking decisions. There’s more to this equation than just lounge access and free checked luggage.
Retention bonuses
To add another factor here, you can get a retention bonus with some cards. Some credit cards will give you a bonus to keep the card. As I said before, you want to wait until the annual fee hits. Then call them and say something like “I noticed that I was charged an annual fee. I was thinking about closing the card but before I do so, I was wondering if there were any retention bonuses available if I were to keep it?”. This works best for airline cards. They’ll give you X amount of miles if you spent Y amount of money in a certain amount of time. It’s nothing like a SUB but hey, bonus points are bonus points. The question is, how much are those points worth?
Let’s say it is 10,000 and you value those points (miles) at 1.5 cpp. If you multiply 10,000 by 0.015 you would get $150 in value, Assuming the annual fee is $95 and you don’t use the card for anything else, you’ll come out ahead by $55. Not amazing, but free is free. Of course, if you are on a super tight budget and that spending could have gone elsewhere, then this might not mean anything to you.
When should you close the card?
This was a trick question as the proper answer is almost never. I’ll address this more at the end. Almost all cards with an AF have another card with no AF that you can “product change” to. It’s really easy to do. Just call up and say that you saw the annual fee, you don’t want to pay it or keep the card so you are wondering if there are any no annual fee cards. They’ll refund the AF and send you out a new card with no AF.
That covers the how, but not the when. I think you first need to determine if the perks plus any retention bonus are worth the annual fee. If they are, keep the card. If not, product change it. Of course, there reaches a point where you can churn the card.
Churning
This is a rather advanced topic but I’ll cover it briefly. Most cards will provide you with a SUB as long as you haven’t received one in the last 24 to 48 months. In other words, you can get the same SUB every 2 or 4 years. Some cards only give you one SUB in your life. You can read the terms and conditions of the card to determine what it is for that card. Let’s look at the United Explorer Card as an example:
I highlighted the relevant language to make it easy for you and it’s important to understand because each card will have it’s own terms. Is it from account opening or bonus received? How long do you have to wait? In this case it is 24 months from the last time you received a bonus. Therefore, if you opened the card on March 1, 2020 and received the bonus on May 1, 2020, you would not be eligible until May 1, 2022.
Note that while it is technically possible to get a SUB on a card by keeping your old card and getting a new one, it heightens the risk of a denial since they may not want to give you two of the same card. Therefore, it is better practice to PC the card first, wait about a month and then apply. Note that some people that churn very often have got their accounts shut down. Therefore, I do not suggest beginners do this with such tight timelines. Instead, put some space between those applications. Using the example above, instead of applying on May 1, 2022, perhaps wait until October or November. Others will tell you this won’t be a problem but I’d suggest being a little more cautious.
Dealing with all of those cards
Obviously if you do this long enough, you’ll end up with a giant stack of cards. How you handle this up to you. A lot of people let them sit in a drawer and collect dust. Others use them once or twice a year to keep them active. A bank could shut them down eventually for inactivity. One on hand, closing accounts could impact your credit score a little bit. On the other hand, having too much outstanding credit could result in denials. Therefore, if you find yourself with too much outstanding credit, it might be a good idea to reduce your credit limits on some of these cards that you’re never going to use again. You also want to keep some of your oldest cards forever. This is a complex topic and it is beyond the scope of this website. If you’re concerned about your credit score, I suggest researching that issue to determine how you should proceed long term.