One of the cornerstones of Milenomics is avoiding annual fees whenever possible. For my travel needs I have yet to find a card which is beneficial enough to keep and pay the annual fee on. Part of that is because signing up for cards again (especially in Two-Player Mode) is just so much more beneficial than keeping a card you already have.
You might argue there are specific cards you know you’ll want to keep regardless of the annual fee. Even if you feel this way I would always suggest at least trying to have the fee waived. Even for those of you with very, very high T-Rates you’ll see with today’s example that the effort is more than worth it.
Step 1: Divide your Annaul Fee By your T-Rate
The first step is to divide your annual fee by your T-Rate. For today’s example I’m going to use my American express PRG since the annual fee just came up on it today. The math works out as follows:
The Dollar signs cancel each other out, and we’re left with the number of hours we could work on achieving an annual fee waiver, in this case 7 hours.
I wouldn’t actually advocate spending 7 hours on this, and as you’ll come to see you won’t need to spend nearly that much time. But for those of you thinking you don’t have time to spend on these waivers you can see that actually, you do. Dividing the potential savings by your T-Rate should help push you to attempt a fee waiver on all your cards.
Step 2: The Subtle Push
I tend to take a more subtle tact when I ask for fee waivers. Other people take a more direct approach. You can try one way, and if it doesn’t work you can Hang Up, Call Again (HUCA) and try the other approach.
For a subtle push to work you need to have a convincing argument. In my case I’ve actually stopped using the PRG almost entirely. I hit it hard in Jan-March, and late last year, but stopped once my Wells-Fargo card arrived in ealy April.
With this piece of information I crafted my reasoning prior to my phonecall. I wanted to cancel the card because I just wasn’t using it anymore, and I couldn’t see spending $175 for a card that’s sitting in my wallet. This is actually true. I find that the best negotiating is always done with the truth, in life and in miles.
For those of you planning a call like this think back on the year–was something about the card not as promised? Was there an area where you were let down by customer service? Use the truth to your advantage, and put together a plausible reason why you’re cancelling.
I called the number on my card and followed the prompts to cancel. I was connected with Scott, a pleasant sounding rep. I introduced myself and mentioned I wanted to cancel because I wasn’t using the card and noticed the Annual fee just hit.
Scott caught my argument and ran with it, “But Mr. Simon I see here you spent quite a bit this past year on the card, in excess of $40,000.”
“Yes,” I answered, “But as you can see I just haven’t found it useful these past few months. I guess you could say…I fell out of love with it.” (a little humor never huts)
“May I ask why?” The rep asked. This type of engagement was a good sign, he was actively listening to me. Nothing is worse than when a rep starts to read off features of the card one by one and ask if you knew about these features…*cough* Barclay’s *Cough*.
“I’ve gotten a new card and I’m using it more and more. I hate to say but it offers me more points per dollar, and has become my go-to card.” Again, all true.
“Well Mr. Simon, I see here that you’re more than halfway towards $30,000 yearly spend. which will earn you an additional 15,000 MR points. That means that every $1 you put on the card for the next $10,000 would actually be earning you nearly 2.5 MR per $1. In addition I see you buy a good amount of groceries and gas with the card, which would mean you’d be earning nearly 3.5 MR per $1 on gas and groceries”
This guy was good. Really good. I’m sure some might have taken this bait, but I’m a #Milenomic, and I knew there were bigger fish out there.
“That’s true, but the $175 is just a bit steep for that chance. I might not start using the card, so I’ll might be paying the annual fee for no reason. I appreciate the offer but I would like to cancel.”
“We value your business. Since you’re such a valued cardmember, and have been with us for over 13 years I can give you 25,000 Membership Rewards points if you keep the card open.”
Here’s where I turn the theatrics on and act surprised, shocked even, at this gesture. “Oh wow, that changes everyhing. 25,000 Membership rewards points? I hadn’t planned on anything like that(I had). That’s so very generous.”
“Will you accept the offer?”
“Indeed I will Scott.”
“Great, and remember this is on top of the 15,000 bonus points you’ll earn if you spend another $10,000 on the card this year.
Things went well for me during my call, but lets take a moment to discuss what to do if the call doesn’t go your way.
How to Abort the Cancellation
I like to advise people that you need to be serious in your claim to cancel in order for the reps to offer you the best retention offers. A lukewarm committment such as “I might cancel if you don’t have a good offer,” is not as strong as “I want to cancel to avoid the annual fee.”
Should the rep you’re talking to play hardball and decide to not offer you anything you may find yourself needing to pull back from the cancellation at the last second. This go-around is a tricky maneuver because for the majority of the conversation you’ve been fully committed to cancelling. At the last second you need to pull up and abort the cancellation, and go-around for one more attempt (HUCA).
Just before the rep processes the cancellation I slip one of the following into the conversation:
- Ask what will happen to my points when I cancel the card. This works best for Closed System cards rather than for Open System cards because the bank holds the points. The rep will tell you the points will be lost if you cancel. At this point you can then say you’ll call back after you transfer them out or use them.
- Ask if there is another card you can convert to without an annual fee. This works for both closed and open system cards. The rep will tell you more about a no-fee card, at which point I sound interested in it but say that I want to research it more before I switch to it. At that point I can hang up and call back again later.
You could just say “oh wait I changed my mind,” but I’m a believer that everything you say with a phone rep has a chance of being written in the notes of your file. So “customer was not serious about cancelling” could end up being seen by future reps.
My Results: 25,000 MR for $175 + $5 (time)
Friday’s call was very successful. I spent 12 minutes on the phone, which is $5 at my T-rate of $25/hr. In addition I was awarded 25,000 MR for my $175 annual fee.
I have a few options here. I can take the 25,000 MR, and put them into my purchase tracking sheet at a total cost of $180. This turns into a cost per point of $0.0072, which is well within my current manufacturing costs for Membership Rewards points. Should I extract at least $.0072 per point when I use them I’ll have earned my $180 back. In realty I’ll probably get something above $.01 per point when redeeming, and so I’ll come out ahead here and pay myself a nice little dividend on my $180 “investment.”
Or, I can take these points as an almost total waiver of my annual fee. American Express allows you to take a statement credit for your MR points at a value of .006 per point. This is a terrible value, and not something I personally would do, but if you were cash strapped and still wanted to keep the card these 25,000 MR would equate to $150 in statement credits. .
Employing this strategy would knock my annual fee down to $25. I can’t imagine a scenario where this makes sense, but I wanted to include it here to keep this post as complete as possible.
You could also use the 25,000 points to book $187 in travel via the Amex Travel portal:
If you have an upcoming trip or a short flight you know you’ll buy with cash this could be a good use of these points, and a way to offset your annual fee with planned spending.
The final option is the shadiest of all, but something that some of you might be interested in:
Take the Money And Run
On the phone the rep said the points might take 4-6 weeks to post. The points have actually already posted to my account (see below). Technically I could transfer everything out and still cancel the card, earning 25k MR and refunding the annual fee.
There’s too much value in earning MR with this card for me to do that. For those of you who don’t see the value in keeping a card, say a Platinum Amex, which I feel is nearly useless now, you could employ the above strategy.
Time is a Valuable Thing
As you can see above spending your time on getting annual fees waived can be a valuable endeavor. The 11-month itch is a strategy I hope to see more and more of you employing. Paying an annual fee will never be superior to making money and miles from the bank which issues your card.
– Written by Sam Simon. All ideas are my own, but I encourage you to see my point of view and I promise I’ll try to do the same. Connect with me on Twitter @Milenomics.