I changed my mind: Can I cancel new card, avoid annual fee?


Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for

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Dear Opening Credits,
I was offered a credit card and was approved online. When I received the card, I noticed in the terms of the contract (in the fine print) that there is a $75 annual fee that was not mentioned online or on any of the company's glossy materials. It increases to $100 in the second year. No thanks. I want to decline this offer now. I have not used the card or activated it. Was the account opened when I accepted the offer (thus I am already responsible for the fees) or does it require me to activate the card? If I don't activate it and don't use it, is there any negative hit to my credit? Thanks so much for your help. -- Ian


Dear Ian,
Yes, the account was granted -- thus opened -- on the date the creditor approved your application. Regarding the fee, though, there may be a way to avoid it. Read on for how.

First know that there are plenty of credit cards that don't come with annual fees. The problem is, you didn't apply for one of them. In all likelihood, the credit issuer did spell out the fee structure in the online application, but somehow you overlooked it. As per the Truth in Lending Act, lenders are required by law to disclose all the terms of the card. You wouldn't be the first person to overlook such details, of course. Many credit customers skim through the wording. Then when they discover what they agreed to, they react with shock: "What did I get into and how can I get out of it?!"

Here's what you can do.

Since you already have the card ready to go, call the issuer and request they waive or reduce the fee. You might be surprised by their swift consent. Competition for good customers is fierce, so credit card companies are often willing to tweak the terms to keep valuable cardholders happy and active. If they agree, fantastic. That will be the end of this story. Use it for a year and if you can't get the annual fee waived again when it renews, you can choose to cancel the card.

On the other hand, you may get a "Nope, that's what this product costs and we're not changing it" answer. In that case you may want to counter with, "Fine, then I want out. Please cancel this account before the annual fee is assessed." Although there is no guarantee that the charge will be removed from your bill, most will allow you to close the account without charging you for it.

And if the fee sticks? Feel free to make some noise. Just bear in mind that you might be in the wrong if the original agreement stipulated that the fee begins at issuance, whether charges are made or not. But there's not harm in trying. Call the credit issuer again and state your case. Ascend the chain of command by speaking with supervisors, explaining the situation, asking for help. Write a letter to the company, copying the CEO, with a simple message: "I applied for this credit card but have changed my mind because the fee is too expensive. I've never used the account so please waive the annual fee." In my experience, polite persistence usually pays off.

As for your credit rating, don't worry about it. Since you don't have a history of using this card, closing it won't have much of an impact. Any points you lost when you applied for the account (which resulted in a "hard inquiry") can quickly be regained with positive credit actions.

But wait! Do you really want to cancel this card, even if the fee is higher than you like? If you have damaged or unestablished credit, accounts with annual fees (and higher than average APRs) are normal. They can be a great way to kick start your good rating. Use it for a year, paying your bill on time and in full and it won't be long before you qualify for one with no fee from the start.

Or you may want a credit card that has an even higher fee. Crazy? Not necessarily. Annual fees can also be a ticket to luxury and savings. Some issuers have products with a yearly cost of hundreds of dollars, but you get much more in return. For example, if you travel a lot, a premium-yet-pricey rewards card might cover expensive checked bag fees and get you into VIP lounges. Discounts on hotels and car rentals can add up fast, too.

In the future, read the application carefully, then apply only if it fits both your credit quality and lifestyle.

See related: Quickly opening, closing accounts makes scores dip a bit, How I fared when I asked for fee waivers on rewards cards 

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Published: June 3, 2015

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Updated: 10-28-2016

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