I opened a boatload of travel rewards credit cards in 2012 — and now it’s time to pay the piper. For many rewards cards, the annual fee is waived the first year, but the fee is due in full on the one year anniversary.
I read about retention bonuses, and wanted to give it a try. If you call the number on the back of your card to say that you are considering canceling — because you are concerned about the annual fee coming due –the bank may offer you a variety of incentives to keep you as a customer. If you tell them you want to cancel the card because you no longer need it — they will probably just cancel it without offering any retention incentive.
My first chance to test the waters came with my Southwest Rapid Rewards Visa, issued by Chase bank. This card carries a $69 annual fee (which is not waived the first year). 3,000 bonus points are offered upon payment of the fee each subsequent year. I called to inquire about canceling my card, and the customer service agent turned me over to a retention specialist. The offer was for 3,000 additional points. Southwest Airlines sells 3,000 Rapid Rewards points for $75 so this was essentially a wash. I received 6,000 points in total, which I knew I could put to good use, so I decided to keep the account open.
The next card to come due was the Starwood Preferred Guest (SPG) card issued by American Express. This card carries an annual fee of $65. Because I opened so many other cards last year that I had to meet minimum spend for (in order to get the bonus points offer), I had not used this credit card much.
I talked to the customer service representative who referred me to a rep in the retention department. As an aside, there was a great deal of confusion about the status of my SPG points if I canceled the card. The two reps had two different stories.
The conversation with the Amex retention specialist went something like this:
Me: I am considering closing the SPG card because I am concerned about the annual fee coming due.
Amex rep: I see you are a new customer. You have been with Amex only one year.
Me: Yes, I opened the SPG card account about a year ago.
Amex rep: I can offer you a $10 statement credit.
Me: $10 is nothing.
Amex rep: I can offer you 1,000 points.
Me: 1,000 points? That’s the same as $10.
Amex rep: At your rate of spend, it would take you 6+ months to earn 1,000 points.
Me: For the $65 annual fee — that would be like paying 6.5 cents per point, that’s crazy.
Amex rep: 1,000 Starpoints can actually be worth as much as $100.
Me: That is not sufficient incentive. Is there anything else you can offer?
Amex rep: You can transfer the account to an Amex Blue Cash Everyday card. That card has no annual fee, and it pays 3 points per dollar spent on groceries.
Me: Are you offering a bonus for opening that card?
Amex rep: No.
Me: My underage daughter received an offer in the mail offering a $250 bonus for opening that card. Why would I want to open this new card when my concern is avoiding the expiration of the Starwood points?
Rep: Because you would not have a hard pull on your credit report.
Me: Ok, thank you. I have to think this over. I need to get clarification on the status of my Starwood points if I close the card.
* * *
The take home messages:
1. Amex reps have a variety of options they can offer as retention bonuses.
2. Amex is using a formula based on my monthly spend to calculate the size of the retention bonus.
3. Because I am not a big spender, Amex is not that interested in retaining my business.
4. Amex is willing to spend a fair amount to acquire a new customer (by offering a big sign-up bonus and paying an affiliate marketer), but they are fairly rigid about collecting an annual fee in year two.
My considerations and options:
1. I will transfer enough SPG points to my Delta Skymiles account to enable me to book a ticket for my daughter. That will leave me a balance of 13,000 points.
2. I will use the SPG card more in the coming month, and call back to see if Amex’s calculation changes.
3. I can’t do much with 13,000 Starpoints. It is enough for a one night stay at some mid-range hotels. More often than not, my travel calls for at least a two night stay. The cash and points option is not attractive to me because I can get a comparable room on Priceline for just the cash. If I transfer the points to Delta, it will not be enough for a free flight. However, Delta points do not expire so I may be able to stash them there. If I close the card, the SPG points will expire in one year. My travel in the coming year will be concentrated in the Northeast corridor. I can look for an Aloft or Element hotel along my route where I could use the points for a free or discounted stay. I love Aloft hotels!
4. I have two Amex Delta cards coming up on their first annual fee in a couple of months — a personal card and a business card. The SPG card earns 1.25 points per dollar if points are transferred to Delta in 20,000 point increments. But, I would have to spend $8000 more to reach this 20,000 point threshold. The Delta cards earn one point per dollar spent. With a $95 annual fee, I will probably cancel the Delta cards as I do not have much Delta travel coming up in the next year.
5. If I close the Delta cards, I could ask to transfer the credit lines to the SPG card. Or, I could close the SPG card and call it a day.
What would you advise me to do?
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