The other day I got a question from a reader who said he’d recently accidentally paid some annual fees that he hadn’t meant to because of bad organization. He asked for my system.
As a bit of background, almost every reward card we have has an annual fee. Many credit card offers waive the annual fee for the first year, but after 12 months of having the card, you are on the hook for the annual fee for the second year.
For me to pay $95 or $175 or $450 to keep a card, I need to be getting some great benefits, and I rarely see keeping the card through the annual fee generating positive value. In fact, the only card I have kept recently was the Chase Sapphire Preferred because its 2 points per dollar on dining and travel are categories I use a lot and a 7% points dividend at the end of the year make it my go-to card when I’m not clearing sign up bonuses.
So how do I keep my credit cards straight, so I know when to cancel a card and avoid an annual fee? It’s actually a simple computer-free system. Printed on every credit card is its expiration date. You may have noticed that the month in that date corresponds to the month you opened up the card. So if your card’s expiration date is 12/15, then you opened that card in December.
If you opened the card in December, that means annual fees will be due each December.
I have two places for credit cards–my wallet and my sock drawer. My wallet contains one to three cards, generally cards that I’ll be using that day to meet spending requirements or as a back up. I keep my Sapphire Preferred in my wallet whenever I am clearing AMEX sign up bonuses, for instance, since AMEX cards are not always accepted, and I want to earn points on all my purchases.
In the sock drawer, I put all the cards I won’t be using that day. I order them in a stack from next annual fee date to farthest away, simply by noting the month in their expiration dates. Right now cards with a February expiration date top my stack (because I’ve already dealt with January cards.)
I tend to see the pile once a month or more because it is next to my pile of loyalty cards, which I need to access occasionally. When I see the pile, I decide whether any action is needed on the top card. If not, I ignore the pile. If so, I look through the pile and act on all cards that need action.
For more reading, see Credit Card Cancellation Negotiations.