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Times have changed! As air travel continues to be put on hold for many in the US and annual fees continue to be applied, credit card holders are considering different approaches when it comes to the cards they keep in their wallet.
Personally, as the days months tick by without travel, I’ve been taking a more conservative approach with the cards that I keep in my wallet.
LETS TALK ABOUT KCC
One common misconception with credit cards is you have to keep a credit card long term. If the card is not providing any value, consider new options.
Generally, the question I ask when I apply for a card (or when an annual fee is due) is “am I getting any value from this card ?” My goal is to extract more than the value of the card but that doesn’t happen all the time…particularly during a pandemic.
Understanding most of my credit cards have travel-focused perks, it’s been challenging to justify paying an annual fee if I’m not traveling.
When an annual fee appears on my statement, there are three options going forward. I’ve coined this term ‘KCC’…Keep, Change, Cancel.
But before I make a final decision, I always call a customer representative to explore my options. Hopefully, the stars have aligned and I can score a retention offer that influences my decision to keep the card for another year.
WHAT IS A RETENTION OFFER?
A retention offer will reduce (or hopefully eliminate) the annual fee thus reducing your out-of-pocket costs for earning points. During a retention call, your goal is determine if they will offer you an incentive to keep the card / pay the annual fee, instead of closing the card. This incentive is known as a retention offer.
In the example below, the annual fee just hit on my CitiBusiness AAdvantage Platinum Select World Mastercard, so I made a retention call to Citi.
Before we dive into the details of the call, let’s take a look at the perks of the CitiBusiness AAdvantage Card:
- Earn 2 miles/ $1 spent on select business categories including gas stations, cable, rental cars, (and more)
- Earn 2 miles / $1 spent on eligible American Airlines purchases
- Earn 1 mile for every $1 spent on other purchases
- First checked bag free on domestic American Airlines itineraries
- Group 1 Boarding on American Airlines domestic flights
- No foreign transaction fees on purchases
It’s worth noting the card has a $99 annual fee that was waived the first year.
WHAT DOES A RETENTION OFFER LOOK LIKE?
It’s important to understand that the card issuer has spent money to acquire you as a client (in the form of cash or welcome bonus) and if you cancel the card in the first year or so, the card issuer has lost money.
So some (but not all) issuers will offer a ‘retention bonus’ or an incentive for you to keep a card open longer. Typically, these incentives take three forms:
- Points – Sometimes they’ll simply say “spend X amount of money in the next 90 days and we’ll give you X amount of points” but don’t expect it to be even close to the initial welcome bonus.
- Statement Credits – This is very similar to the points above but instead, they’ll off say “spend X amount of money in the next 90 days and we’ll give you a X dollars as a statement credit.”
- Reducing (or waiving) the annual fee – Sometimes, representatives simply say “you’re incredible and we really value you as a customer so we’re completely waiving your annual fee (or reducing it by 50%).”
Ok, perhaps, there was some embellishment in the last example but you get the point.
MY PAST EXPERIENCE AND MY NEW EXPERIENCE
I have another CitiBusiness AA card and earlier this year was offered 10,000 AA miles after spending $500 in 90 days. I could easily meet the spending threshold and I value AA miles at 1.4 cents each so 10,000 miles is worth, at least, $140. I felt the offer was extremely generous and worth more than the annual fee so I kept the card.
There is never the expectation that the issuer has to offer a retention but I’m optimistic on all my calls. However, it was not happening on my retention call for my second CitiBusiness AA card.
Generally, when I make a retention call I say something along the lines of “Hi, I noticed the annual fee on my (insert card) just posted and I’m debating the next step. I enjoy the (insert favorite perks), but it’s becoming more challenging to justify the annual fee. So, I was calling to inquire if there are any retention offers available on my account that may help aid my decision?”
Often the representative will reply by stating how awesome the card is and begin naming random benefits like “it has 2% APR” in an effort to WOW you and convince you to keep the card. And that is exactly what this representative said to me.
I asked if there were any better offers but did not want to press the representative to dig further into my profile and say something like “you don’t really put much spend on this card so you’re not that valuable to us.” Hopefully, she would say it in a more PC way but she said there were no other offers on the card.
Obviously, if they do not offer a bonus at that point, decisions need to me made.
Given the three forms that incentives usually take, I prepare what I am willing to accept before making the call.
This time I also added that it was challenging to justify the fee in light of the pandemic when most of the perks were geared toward travel. It didn’t work at all so I cancelled the card.
…Another one bites the dust!
FINAL STAMP
It’s unfortunate that I had to cancel the card but I also have another CitiBusiness AA card so it’s not much of a loss. I am able to rack up AA miles with the first card which opens my ability to redeem on Oneworld partners (see Qatar). I can also redeem transferrable miles (Chase, Amex, etc.) on Oneworld partners if I absolutely need to fly on American Airlines.
Having the representative return to the line and say there were no additional offers was disappointing. It goes without saying that the more you spend on a card, the more likely you are to receive an offer because you are “valuable” to the card issuer.
It also goes without saying that card issuers are more likely to offer incentives on a card with a high annual fee too so don’t expect much on a card that is ~$99 AND WAS WAIVED FOR THE FIRST YEAR. 😉
Have you ever made a retention call before? What was your experience?
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