Picture this: it’s January 2020, and you’re ready to commit to a top-tier travel credit card with a whopping $500 annual fee. Why? Because you want to book a number of bucket-list trips and cash in on those sweet travel perks that come with it. Great! You sign up and are approved. Fast forward to May, and thanks to the coronavirus pandemic, all of your travel plans for the year have been thrown to the wind, not to mention you’ve had to take a pay cut at work. So now you’re not able to take advantage of the majority of the perks you signed up for, but you’ve already paid the $500—it’s not an ideal situation. If you find yourself in this position, we’re here to run through your three options for what to do: sit tight and keep the card, cancel the card entirely, or downgrade the card to one with a lower annual fee.
Keeping Your Card
“Pivot” is the name of the game during the pandemic, with everyone from big brands to individual workers trying to make sense of the new normal and find a way to keep moving forward. Credit card companies are no exception. Knowing full well that cardholders aren’t able to use their travel perks—and that they’re not going to be happy about paying the annual fee for naught—the issuers have been tweaking their programs to benefit cardholders in a number of ways, incentivizing them to keep their cards.
While a number of these changes have been widely publicized, others won’t show up in any official documents issued by the credit card companies. “Sometimes card companies have additional retention offers available upon request, kind of like a cable company that tries to sway you from canceling,” says Ted Rossman, an industry analyst at CreditCards.com. “A lot of the time, you can get an annual fee waived or lowered just by asking. Or maybe the card company can sweeten the pot with additional rewards points that offset the annual fee.”
We’ve run through some of the heavy-hitting pros to keeping your travel credit card below, including a number of changes to perks.
Some credit cards are issuing statement credits to help offset annual fees.
Just this year, Chase Sapphire Reserve cardholders had their annual fee raised from $450 to $550—a pretty significant jump. But since the pandemic started, Chase has been offering $100 statement credits to some of its cardholders (based on the date that annual fee kicks in), effectively eliminating that increase.
There are major points bonuses for atypical categories.
While many credit cards issue points multipliers for spends in certain categories, such as travel or dining, they’ve pivoted to focus on categories where people are spending a lot of money these days: namely, in supermarkets. For example, Marriott Bonvoy–branded Amex cards are offering 6x points at U.S. supermarkets, up from 2x points pre-pandemic, while Delta-branded Amex cards are offering 4x miles at U.S. supermarkets.
Travel statement credits can now be applied to other categories.
Citi Prestige cardholders, for instance, are given a $250 statement credit for travel, but that credit can now be redeemed in supermarkets and restaurants, including take-out and delivery.
Travel perks, from companion passes to elite status to lounge memberships, have had their expiration dates pushed back.
Just as the airlines and hotels themselves have extended elite status for loyal customers, credit cards are extending the expiration date for most travel benefits, allowing you to redeem them well into 2021 or even 2022.
The sign-up bonus period has been extended.
If you’ve just signed up for your travel credit card, many issuers are extending the “spend to earn points” sign-up bonus period (i.e., the promotional deal where you spend $3,000 in your first three months to get 50,000 points, or some similar program) for new cardholders. That way you won’t miss out on your big points bonus, even if you’ve had to decrease your monthly budget.
Your credit card spend might actually go toward Million Miler status.
If you have a Citi/AAdvantage card or an AAdvantage Aviator card, your spend through the end of the year will actually count toward Million Miler status on American Airlines. This a huge deal for frequent flyers—since 2011, the only way to earn miles that count toward your Million Miler status has been to actually fly them.
You can use your credit card spend to keep hotel loyalty accounts active.
Typically, points accrued in your hotel loyalty account disappear after a year or so of inactivity, meaning the time since your last stay (although, given the pandemic, these deadlines have been pushed back). But in some cases, like with the World of Hyatt card and the IHG Rewards Club card, using your hotel-branded card actually keeps your account active, so don’t you have to worry about booking a stay.
You’re still going to earn miles for spending.
Dreaming of splurging on a big vacation next year using all your accumulated miles? Keep your credit card open to build up your stockpile.
Canceling Your Card
On the opposite end of the spectrum, you can cancel your card outright—but we don’t recommend doing so. “Canceling a card often hurts your credit score because it raises your credit utilization ratio,” says Rossman. “I understand wanting to avoid an annual fee in some instances, but if you think you want to cancel, you’re better off keeping the account and switching to a different product from the same card issuer that better meets your current needs.” Canceling your card, especially if you’ve had it open for a while, can also affect the average age of your credit accounts, which would also lower your credit score.
If you are dead set on canceling, be sure to ask your credit card company about any last-ditch retention offers they might be able to give you—perhaps they’ll be able to make you an offer you can’t refuse.
Downgrading Your Card
Behind door number three, we have the happy medium Rossman mentioned above: downgrading your credit card to one that doesn’t have a hefty annual fee. Now, if you go this route, do note that you’ll have to stick with your same credit card issuer and the same product line as your original card, so you can’t jump between, say, the Chase Sapphire line and the Chase United line.
The major pro to downgrading is that you’ll be able to pay a lesser annual fee—or perhaps even no fee at all—while preserving your credit score, as you technically will be keeping your original account with your same line of credit. The con is that you’ll lose out on all the perks offered by your top-tier travel card, potentially including your sign-up bonus and even accumulated points. If you decide to downgrade to a more affordable card, there’s likely going to be a lot of fine print involved, so we urge you to do extensive research and ask your issuer many questions before going through with it. There’s also a chance that you may be denied a downgrade, so keep that in mind, too.