Many of the premium credit cards I recommend have annual fees ranging from $65-$200 per year.
These annual fees are totally worth paying in the first year because the welcome bonus on these cards is often worth thousands of dollars.
But what about in the second year, and third year, and so on?
It really just depends on the card.
I’d say, as a general rule, I cancel most of my credit cards at the one year mark from when I was approved for them.
A few weeks ago, I had 3 annual fees hit various cards since these cards are beginning their second year.
This is usually my reminder to decide whether I want to keep the card or cancel it.
The good news is that, for most cards, when the annual fee hits, you have about 30 days to cancel the card & get a refund of the annual fee. It’s very common for me to see an annual fee hit and then message the carrier to cancel the card. They’ve always refunded the annual fee.
Of the 3 annual fees that hit for us this week, we decided to cancel one card & keep the other two.
Why would we keep the others?
Because the benefits of the card for the next year far outweigh the annual fee I’m paying.
That’s how I decide.
One of the cards had an annual fee of $149, but the benefits I’ll use this year from that card are over $300, so that one was a no brainer. It was a similar story on the other one.
The card that had a $199 annual fee just didn’t have many benefits I’d use this next year, so I canceled it.
Another card I always pay the annual fee on is the Chase Sapphire Preferred card. Chase requires you to have a Chase premium card to be able to transfer points to travel partners, which I use frequently.
Each time you’re trying to make the call to renew or cancel, just look through the card benefits again & make sure they’re sufficient to cover the fee. In most cases they won’t be, but in some cases they will be.
If the card doesn’t have an annual fee, I usually recommend you keep it because having it open helps your credit score. The exception here would be if you need to cancel it to apply for it again to get the welcome bonus.
Ok, here’s the summary:
- As a general rule, cancel your card after the first year to avoid paying the annual fee in year two
- If the card has benefits in subsequent years that exceed the annual fee, consider keeping that card
- And if the card doesn’t have an annual fee, plan to keep it in order to boost your credit score
Hope this helps you save on annual fees each year so you can keep applying for new cards!
