Sixteen years into my credit card life, I finally signed up for my first card that charges an annual fee. Here’s what drove me to change my mind.
Sixteen years into my credit card life, I finally signed up for my first card that charges an annual fee, the Blue Cash Preferred® Card from American Express. What convinced me to take the plunge?
I’m spending more on groceries
As a longtime user of the no-annual-fee Blue Cash Everyday® Card from American Express, I’ve always known that the Blue Cash Preferred offers better rewards on U.S. supermarket spending (6 percent cash back as opposed to 3 percent, in both cases on up to $6,000 of annual spending, then 1 percent cash back after that). But the Preferred card’s $95 annual fee caused me to hold back for years.
If I max out the $6,000 annual limit, I’ll come out $85 ahead with the Preferred ($360 cash back minus the $95 annual fee equals $265, versus $180 in cash back with no annual fee on the Everyday version). But what if – I always asked myself – I don’t spend $6,000 per year on groceries? Or what if another one of my cards offers a comparable reward?
I also have the Chase Freedom, which usually gives 5 percent cash back on groceries in one of the year’s four quarters (up to $1,500 in quarterly spending after you activate the promotion). Do I spend enough on groceries to max out the Chase Freedom quarter and still spend $6,000 throughout the rest of the year at U.S. supermarkets? The answer used to be dubious, but no longer.
Last year, when my daughter was three, we maxed out the Chase Freedom’s grocery quarter and the Blue Cash Everyday’s $6,000 annual threshold with room to spare. This year, we’re spending even more on groceries as Ashleigh continues to grow. That sealed this part of the deal.
Still, is upgrading really worth it for $85?
See related: When is a credit card annual fee worth it?
They’re going to pay me a $250 bonus
Maybe, but $335 is better! American Express is currently offering a $250 welcome bonus to new Blue Cash Preferred cardholders who spend $1,000 within the first three months. Still, as nice as this free money sounds, could I do better elsewhere? And will it hurt my credit?
It won’t affect my credit
Unlike most new cards, adding the Blue Cash Preferred to my wallet did not affect my credit. That’s because I signed up via a product change, not a new card application, which requires a credit check (the accompanying hard inquiry usually trims 5-10 points off one’s credit score for six months or so). Most new cards also lower the average age of your accounts, which can also diminish your credit score.
To be fair, these elements shouldn’t drastically impact your credit score, and a new card can potentially help you in other areas (such as a lower credit utilization ratio and a broader mix of credit). As long as your FICO score is 740 or above, you really shouldn’t worry about this minutiae anyway, because once you’re at 740-plus, you’ll qualify for the best terms.
Still, I’m thinking of signing up for the Citi Premier® Card this fall in advance of my upcoming Disney World trip, so I don’t want to make back-to-back new card applications.
It’s important to note that a product change rarely qualifies for a welcome bonus, but I was able to snag one through a targeted offer. Product changes are often my recommendation when someone considers canceling an annual fee card that they’re not getting value from. By requesting a product change to a no-annual-fee card, someone in this situation can save money without affecting their credit score.
In my case, the targeted offer loophole convinced me once and for all that there weren’t any good reasons to stick with the Blue Cash Everyday over the Blue Cash Preferred.