5 tips for negotiating rewards cards' annual fees

You may not get a waiver, but retention offers of points, discounts common


Looking for a way to lessen the sting of a credit card's annual fee? In many cases, ask and you shall receive.

Credit card issuers can be surprisingly receptive to cardholders who are seeking a break on paying their annual fees. They won't always waive the fees, of course, as those can be a valuable source of income. But as in any negotiation, there might some middle ground that the bank and customer both find acceptable. 

You have the power
It is an interesting twist that in a time when the mail, the Internet and email inboxes are flooded with offers from card companies, customers can often do better by picking up the phone and making the first offer themselves.

Rewards card fee negotiations

It can be a little like a tug of war, but getting a deal on your annual fee may be easier than you think.

   5 tips for negotiating cards' annual fees
   How I fared when I asked for fee waivers

"Consumers do not always realize they have that kind of power," says William McCracken, chief executive of Synergistics Research Corp., which conducts market research for financial institutions. "With card issuers, they can get better deals. Don't wait until you're so mad that you're about to quit. Way beforehand, if you feel that you deserve a lower fee, call and ask. Many times, [you] will be pleasantly surprised." 

McCracken likens the flexibility of card companies to that of cable television providers, who are also known to trot out deals when customers call to cancel.

Although waiving the full annual fee is rare, banks have wide latitude to offer other perks, such as extra reward points or frequent flier miles. In some cases, the value of these points can offset the cost of the annual fees. 

In a December 2014 survey by Synergistics, one in five credit card customers said they had canceled cards in the previous year because annual fees were too high.

Banks are willing to cut deals because it is more profitable for them to retain customers than to spend money on marketing and promotions to land new ones -- especially if they can encourage existing customers to use the card more. Landing a new customer can cost banks around $80, according to the Database Marketing Institute. If that customer sticks around, the bank stands to make about $120 a year in profit through merchant fees, interest and customer fees. But if the bank loses the customer, it's out the $80 investment.

Some cardholders flirt with closing their credit card accounts as a strategy to squeeze more perks from their banks.

Josh Tasman, 22, of Grand Rapids, Michigan, says he calls credit card companies about his cards every three months and asks if they have any retention offers. More than half the time, he says, they do -- including sometimes waiving or reducing a card's annual fee.

"If you just ask for it, many times they will do it, because they want to keep you as a customer," Tasman says. 

He maintains a list on his blog of retention offers from various reward cards, so people can see before calling what they are likely to receive. Scan the list, and you'll see that it is mostly offers to receive additional points for stepped-up spending on a card.

5 tips for negotiating annual fees
Tasman and McCracken offer these pointers for successfully asking for a break on annual fees: 

  1. Use the card. Banks will give the best retention offers to their best customers, so your odds of having the annual fee waived increase if you use the card frequently in the months before you seek an offer. "They look for customers who are making them money," Tasman says. "It doesn't have to be a lot of money, just a steady flow of transactions. That gives you better odds of getting a retention offer." 

  2. Be respectful. It's often said that the squeaky wheel gets the grease, but in conversations with credit card representatives, don't squeak too loudly. It can pay to be polite. In most cases, the phone agents don't have a lot of discretion -- computers tell them if you're eligible -- but they don't have to offer you anything, either. "They have some ability to vary the offer, so you want to stay on their good side," McCracken says. "Be polite, but make a good, factual case." You don't have to threaten to cancel the card or lie. You can just say you don't like paying the annual fee and ask if there is anything they can do.

  3. Negotiate by phone. Although it might take less time to send a direct message to the card company on its website, it is better to call and talk to a live person. That way, you can better make your case and easily ask any questions.

  4. If you're not satisfied, call again. Because some agents have a little bit of discretion, calling back to talk to a different one could yield a different result. Tasman says he has had instances in which card companies tell him no offer is available, but when he calls back five minutes later and talks to somebody else, they make him an offer.

  5. Don't worry about timing of annual fee. Whether your annual fee is coming due shortly, you recently paid it or you paid it six months ago, you can still receive offers to cushion its blow.
See related: When to close an annual-fee card, Complain and win: 4 tips for calling credit card customer service

Published: May 18, 2015

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