“So what do you do with a card after the first year?”  I get this question A LOT, and what an excellent question it is.  Let’s talk strategy, and how to use points and miles to reduce your travel costs, while maintaining financial health.

So you got a card.  It came with an increased bonus offer, and you already redeemed them for a European vacation that you couldn’t otherwise afford out-of pocket.  Kudos to you!  But that card comes with an annual fee, and you’re not sure if you want to keep paying that year after year.  What do you do?  Cancel, keep, or downgrade?

For starters, it’s always a great idea to keep a card for the first year.  The best card offers – generally speaking – will come with an annual fee.  Don’t risk your chances of not getting approved for future credit card offers by canceling a card before the first year.  Banks want to see you as reliable, trustworthy, and not “gaming” the system – so longevity is key.  Even if a credit card is only as valuable as the initial bonus offer to you, there is a way around continuously paying annual fees.

Now, what does that mean?  Well, you’ll need to assess after the first year if you want to keep the card or downgrade it to a no-fee option.  If it’s a hotel or airline-branded card, you’ll need to ask yourself if you see yourself being loyal to this brand.  Annual fees on such cards are worth it through some level of loyalty.

For example, The World of Hyatt Credit Card has an annual fee of $95.  Even though we split our stays between Hyatt properties and Airbnbs (depending on the type of trip and availability), it is still worth it to me to keep this card.  I get an annual free night certificate, have earned an additional free night thanks to Hyatt Brand Explorer, and they offer the Family Plan Discount Rate at select properties.  When traveling with my family, Hyatt offers me the best value for my points, and money (when I need to pay a discounted rate for the second room).  So this is one card that is a keeper for me.

Now let’s look at my Marriott Bonvoy Boundless® Credit Card.  This card covered my 7-night stay in Morocco this past December.  (And my total hotel costs for any other taxes, fees, and meals was $0!).  Now we normally do not stay at Marriott properties when we are traveling as a family, and that is the bulk of our travel.  I can’t justify the $95 annual fee on this card any which way.  So this coming summer, around the 1-year mark, I’ll be calling to downgrade the card to a no-fee option.

Why am I not canceling the card?  Because again, that has a negative impact on your credit (I’m no financial advisor by any means!).  It’s fairly simple to downgrade a card to a no-fee option, and then put it away if you aren’t using it regularly.  That doesn’t affect your credit like canceling a card outright does, as the account still stays open.  (I’ve made this mistake before and it doesn’t fare well.)

I recently had my husband apply for the Southwest Rapid Rewards® Plus Credit Card in late 2022.  (We earn the Companion Pass through a one-card trick.)  But here was the catch – my husband had had another Southwest Card previously for a good couple years now – and you can’t open another Southwest personal card until you’ve canceled your current card.  Southwest also doesn’t have any option for a no-fee card.  Because I knew I was going to need him to apply for a card this past fall (so we could earn the Companion Pass for 2023), I had him cancel his current card in the spring of 2022.  That gave him more than enough cushion time of a couple months before he applied for another personal Southwest credit card.  

Cards that earn you flexible rewards currency work in a similar fashion.  I got the Chase Sapphire Preferred® Card last year when the offer was at 80,000 points – that’s higher than its standard offer of 60,000 points.  Because Chase Ultimate Rewards are a crucial part of our award travel strategy, this card is a keeper for me.  You can only earn bonuses on a Chase Sapphire product every 48 months.  Around that time, I’ll downgrade to a no-fee option, so I can reapply for this card and get the bonus offer again.

Also, you need a Sapphire card to book travel, aka, transfer Chase points to travel partners 😉  So if you have other Chase cards that earn you points, you’ll need to transfer those points to your Sapphire card as that is the card that allows the full range of travel perks.  I recently applied for the Chase Ink Business Cash® Credit Card.  Any points I earn on this card are combined with the points earned from my Chase Sapphire Preferred® Card.  Initially you’ll need to make a phone call to the bank to link your accounts; going forward you can send points from one account to another instantly online.

The Citi Strata Premier℠ Card on the other hand, (the offer is back down to the standard of 60,000 points, fyi) a card that my husband and I each got last year, may not be a keeper for us.  I’m in the process of having my husband downgrade his card, as it’s not one we are currently using.  I’ll most likely do the same with mine later this year (near the one-year mark).  It’s an all around great card that got us great redemptions, but not one I can justify continuing to pay the 95$ annual fee on (x2).

Paying annual fees on cards is always worth it the first year as that’s when you get and use the bulk of your points.  It’s going forward where you need to assess if you’re benefiting and/or making use of the perks the card has to offer.  Don’t let annual fees or having multiple cards at once scare you.  Just remember the three pillars of award travel.  If you have all three in check, your credit score will actually increase over time 😉