Maximizing Card Benefits: Keep or Cancel the Annual Fee?

Is Your Annual Fee Worth It?

Credit cards with annual fees are part of the financial routine of millions of consumers.

But the strategic question is simple: should you keep or cancel a card with an annual fee?

The Math Behind the Decision

Suppose a card has the following features:

• $550 annual fee
• $300 in travel credits
• 3x points on travel spending
• Lounge access

First filter: are the $300 in credits truly usable? Do they apply to any travel expense, or are they restricted to specific categories?

If you would naturally spend that $300 anyway, then the effective cost of the annual fee drops to $250.

Beware of “Inflated Value”

Many issuers advertise benefits with high estimated values, such as hotel elite status and rental car insurance.

But here is the honest question: would you pay $50 to enter a lounge if you did not have the card?

If the answer is no, then the value is not $50 to you. It may be $10. Or zero.

Financial planning requires evaluating benefits based on real marginal value, not retail price.

Usage Profile Matters

Cards with annual fees tend to make more sense for people who:

• Spend significant amounts in bonus categories
• Travel frequently
• Know how to maximize point transfers to airlines.
• Maintain discipline to use credits before they expire.

For those with lower spending volume or who use points primarily for simple cashback, a no-annual-fee card is often more efficient.

Impact on Your Credit Score

Canceling a card is not neutral for your credit score. The U.S. system considers average account age, credit utilization, and total available credit.

If the annual fee card is old and has a high credit limit, canceling it may reduce your total limit and increase your utilization rate—potentially affecting your score.

Before canceling, evaluate the age of the account, the available limit, and the impact on total utilization.

In some cases, requesting a downgrade to a no-annual-fee version is more strategic than canceling outright.

Retention Strategy

Many banks offer retention offers when you call to cancel, such as bonus points, additional statement credits, or temporary reductions in the annual fee.

Before canceling definitively, it is worth contacting the issuer to see if an offer is available.

However, do not accept an offer merely to postpone a structural decision. If the card no longer fits your strategy, keeping it out of inertia is not planning—it is financial procrastination.

Life Stage Changes

The usefulness of an annual fee card is not static. Life changes:

• You used to travel frequently for work but changed roles.
• You reduced international travel.
• You now prioritize cashback over miles.
• You are focused on building liquidity rather than experiences.

Financial strategies must adapt to behavioral changes. The card that made sense three years ago may no longer make sense today.

Comparing No-Annual-Fee Alternatives

The U.S. market offers no-annual-fee cards that provide 2% flat cashback, 3% rotating categories, and competitive welcome bonuses.

If you do not use lounges, elite status, or premium insurance benefits, you may be paying for perks you do not use.

Make an objective comparison:

• What is your total annual spending?
• What is your average return rate?
• How much do you actually redeem per year?

Put everything into numbers.

When Keeping the Card Makes Sense

Keeping the card tends to be rational when:

• Credits offset most of the annual fee.
• You extract high value per point (especially for international travel).
• You frequently use premium benefits.
• The card is central to your rewards strategy.

In this scenario, the annual fee shifts from being a cost to being an operational investment.

When Canceling Is the Right Decision

Canceling tends to be appropriate when:

• You do not fully use the credits.
• Points accumulate without redemption.
• Your spending profile has changed.
• The cost exceeds the net benefit.
• The card is redundant in your wallet.

Keeping a card purely for emotional status or “because I’ve always had it” is not strategy—it is attachment.

Written by

Gabriel Gonçalves