As the pandemic cancels fall plans like in-person classes and college football, you may not be expecting to travel through 2020—and beyond. With all the travel restrictions, you may be thinking about your rewards credit card, the hefty annual fee, and whether it still makes sense to keep it.
Opinions have been mixed over the past five months. A recent CreditCards.com poll found 81% of folks with annual fee credit cards feel they are getting the same or more value from their rewards cards, like extra points for groceries, for example. A new survey from ValuePenguin found the opposite was true, though—with 30% of those surveyed closing at least one rewards card.
If you’re approaching another annual fee, it may be time to weigh the pros and cons of keeping your travel rewards credit card. Here are some things to consider before making a decision.
Make a list of your latest card benefits
Start the process by making a list of your complete cardholder benefits—including the ways to earn and redeem your rewards. Your credit card may be offering different features amid the pandemic. Some companies have shifted perks and benefits for stay-at-home cardholders.
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For example, Chase Sapphire Reserve—one of the premium travel rewards credit cards—is offering new temporary perks. The company’s pandemic-friendly benefits include 5x points on Instacart deliveries, $50 statement credit for Instacart Express membership, 5x points from gas stations, and 10x points on streaming services through September 30.
After making a list of your complete benefits—including which perks you will use—it may be easier to gauge whether the annual fee is still worth it.
The risks of closing your credit card
The biggest downside to closing your travel rewards card may be the temporary ding to your credit score. Closing any credit card may impact two parts of your credit score: your credit utilization and credit history. Together, these factors may impact 45% of your credit score.
Your credit utilization—or the percentage of your total credit limit you are using—makes up 30% of your credit score. You should aim for 1% credit utilization—and closing a credit card may increase that percentage depending on your current balances. If your rewards card is older, you also risk damage to the length of your credit history, which makes up 15% of your credit score.
Another risk of closing a rewards credit card is possibly losing access to your rewards. For example, canceling your Chase Sapphire Reserve card means forfeiting your Ultimate Rewards balance. If you have a large points balance—consider how much they are worth and ways to redeem them—before making a decision.
Closing a credit card too soon may also hurt your relationship with the bank. According to The Points Guy, you should never close a credit card before hitting the one-year mark. The company may flag you for abuse or misuse, which could prevent future credit card approvals.
Ask your credit card to waive the fee
If you decide to keep your travel reward credit card, call to see if they will waive the annual fee. There may be much longer than usual hold times—so you will have to be patient—but the wait to speak with a representative may pay off.
As you go through the automated phone system, NerdWallet suggests avoiding the word “cancel” because the computer may cancel your card before you have had the chance to speak with a representative.
Million Mile Secrets says you may have more leverage if you have been a good customer—with on-time payments and regular card use. The company may be willing to reduce or waive your annual fee to keep your business—although it may be less likely with the premium travel rewards cards. Even if the company won’t budge on your annual fee, they may counter with a retention offer— like bonus points or a statement credit—which could offset part of the cost.
Consider downgrading your credit card
If your credit card company doesn’t waive your annual fee—or provide a good enough retention offer—you may ask if you can downgrade to an option with no annual fee. It may be possible to keep your credit limit and rewards balance intact by downgrading to another card. This won’t be an option for every travel rewards credit card, though.
