Should I Keep This Card? Whether to Hold or Cancel a Rewards Card When an Annual Fee is Due


One of the main questions people email me to ask is whether they should cancel one of their rewards cards before the next annual fee.

I cannot answer that question. Only you have the information necessary to answer that question for yourself. I’ll lay out the two-step process you should use to determine which cards to keep and which to cancel.

How do I approach the decision of whether to keep or cancel a card?

  1. Am I getting a retention bonus for keeping the card that is worth more than the annual fee? If so, I keep the card. If not, I go to step 2.
  2. Are the marginal benefits of holding the card larger than the annual fee. If so, I keep it. If not, I cancel it.

Both steps come down to future-looking value. The annual fee is a cost, and I need to get a benefit at least as big as that cost by keeping the card.

Step 1: Hold Cards that Offer a Retention Bonus Bigger than the Annual Fee

I’d automatically hold onto my cards with no annual fees. The Discover it Miles Card has no annual fee, so I’d keep it. For other cards, compare the annual fee to retention bonuses. There are two types:

  • an automatic retention bonus
  • a retention bonus if you call and ask for one

The Club Carlson Premier Rewards Visa Signature Card offers a 40k point retention bonus and a $75 annual fee. If you value a Club Carlson point above 0.19 cents, you should keep the card. (They’re worth more like 0.3 cents to me.)

The American Airlines cards have no automatic retention bonus, but you can often get a retention bonus of a few thousand miles or a statement credit equal to the annual fee if you call the number on the back of your card and say you’re thinking of canceling it.

For cards with an annual fee and no retention bonus, even after asking, move to Step 2.

Step 2: Are the Benefits of Holding the Card for Another Year Worth More than the Annual Fee?

Tally up all the benefits of holding a card for another 12 months. If they are worth more than the annual fee, keep the card. If they are worth less, cancel the card. A card might offer:

  • more points for your spending than your other cards offer
  • lounge access
  • elite status or the chance to get elite status through spending
  • statement credits
  • other benefits
Better Earning Potential than Your Other Cards

Obviously one of the main reasons to keep a rewards card is the rewards from spending on it. You need to figure out the value of keeping the card by figuring out the rewards you earn from spending on the card and subtracting the rewards you’d earn from putting that spending on other cards.

Ink Plus 5x Example

For instance, imagine you have an Ink Plus with 5x points per dollar at office supply stores and on cellular phone, landline, internet, and cable TV services. You spend $5,000 in those categories earning 25,000 Ultimate Rewards per year. You value Ultimate Rewards at 2 cents each, so those points are worth $500 to you. If you cancel the card, you’d have no category bonus for that spending, so you’d put it all on your SPG card earning 1 Starpoint per dollar. You’d value those 5,000 Starpoints at 2.5 cents each or $125.

That means you get $375 extra in value from the category bonuses on the Ink Plus. That’s way more than the card’s $95 annual fee, so keep the card.

ThankYou Premier 3x Example

Imagine you have the Citi ThankYou® Premier Card with 3x ThankYou Points on travel including gas and 2x ThankYou Points on dining Out and entertainment. You spend $8,000 on travel including gas each year because it is such a broad category and $5,000 on dining and entertainment, earning 34,000 ThankYou Points per year in those categories. You value ThankYou Points at 1.8 cents each, so those are worth $612 to you. If you canceled the card and had to put that spending into 1x categories, that would be a huge loss, so you wouldn’t cancel the card.

But imagine if you also have the Citi Prestige® Card with a similar 3x category and identical 2x category. The Prestige offers 3x on air travel and hotels. That would change the math of how much extra holding a Premier is worth.

Bottom line: figure out NOT how much your spending on the card you’re thinking about canceling is worth but how much EXTRA your spending is worth than it would be worth on your other cards.

Everyday Spending Cards

For most people, the best cards for unbonused spending are the Arrival Plus and SPG cards. The Arrival Plus earns 2x on all spending and points are worth 1.14 cents each toward all travel purchases. That’s a 2.28% return. The SPG card earns 1x on all spending, and I value SPG points at 2.5 cents each, so that’s a 2.5% return.

When thinking about canceling your everyday spending card, go through the same process. Figure out how much you spend on the card to figure out how much you are getting in rewards from that spending. Then subtract the value of putting that spending on your next best card.

If the EXTRA value of spending on the card in question is bigger than its annual fee, otherwise cancel it if it doesn’t have other benefits listed below.

Lounge Access

Does the card offer lounge access? If so, at what price do you value that lounge access? Forget about lounge access’ retail price.

How much you value lounge access is how often you use the lounge times the value of each visit.

I value generic lounge visits at about $15 even though they retail for about $50. Most people probably value lounge access higher than me; it’s just something you need to put a number on for yourself.

My Citi Prestige® Card offers me free Priority Pass lounge access no matter who I’m flying, and two free guests at any of those lounges. I only use this lounge access when flying domestically or in international economy because international premium cabin awards come with free lounge access that is at better lounges. If I were evaluating keeping this card right now for another year, I’d have to estimate how many times I’d use that lounge access. I’ll guess 10 times and multiply that by $15 of value each time to get $150 as the value of this benefit.

You should not value lounge access from the Citi Prestige® Card at $150. You should value it at your number of uses times value from each use.

Other cards that offer lounge access: American Express Platinum, United Club Card, American Airlines Executive Card.

Elite Status Through Spending

Some cards offer elite status through spending. The Citi® Hilton HHonors™ Reserve Card gives all cardholders Gold Status, and any cardholder who spends $40,000 on the card in a calendar year moves up to Diamond Status. The Delta Reserve card offers 15,000 Medallion Qualifying Miles for spending $30,000 in calendar year and another 15,000 MQM for spending $60,000 total.

Screen Shot 2015-06-19 at 5.16.12 PM

When valuing this, figure out how much the status you’re getting is worth to you, how much the other rewards from the spending are worth (in this case HHonors points or SkyMiles) and subtract the value of the rewards you’d get from putting that much spending on another card.

For instance, putting $60,000 on the Delta Reserve will earn 30k MQM and 60k Delta miles. That’s great, but putting that $60,000 in spending on the SPG would earn 60,000 Starpoints, which are worth $1,500 to me. Putting that $60,000 toward several minimum spending requirements would earn even more rewards. Don’t forget to subtract the value of the rewards you could have had from the value of the rewards you did get to see the EXTRA value of holding these cards.

Statement Credits

The Citi Prestige® Card offers $250 in statement credits each calendar year to offset the first $250 in airfare, award taxes, or airline fees. I spend so much more per year on those things that I value this at $250.

The AMEX Platinum offers $200 in statement credits each calendar year to offset the first $200 in airline fees or airline gift cards. I find this a little more annoying to redeem, so I value it at $195.

Both cards also offer a $100 statement credit for Global Entry every five years. Add in that value if its use is upcoming.

Other Benefits

The United Explorer card secretly offers extra Saver award space in economy on United flights. That could be worth $0 to $500+ to you per year depending on your award redemption habits.

The Citi Prestige® Card offers three free rounds of golf per calendar year. That could be worth $0 to $750+ to you depending on your love of golf.

The British Airways card offers a “free companion pass” (just pay crushing taxes and fuel surcharges) if you spend $30,000 in a calendar year. For most people, it is worth $0. For people who value Business or First Class redemptions near their retail value, it could be worth thousands of dollars.

The AA personal card offers a 10% rebate on redeemed miles up to 10,000 rebated miles per year. That benefit is worth $0 to $180 depending on how many miles you redeem each year.

Many airline cards offer free checked bags for you and companions. This benefit is worth $0 to $500+ depending on how often you fly, your status, whether you fly with companions, and whether you usually check bags.

Sometimes holding one card makes the points on another more valuable. Holding the Sapphire Preferred or Ink Plus turns the Freedom’s rewards from pennies into United miles. Holding the Citi Prestige® Card makes the ThankYou Points earned on the Citi ThankYou® Premier Card worth 1.33 cents each toward flights instead of 1.25 cents each.

Add Up the Benefits and Subtract the Annual Fee

I have a United Explorer Card right now. For the next year, I would expect to get $0 to $50 in benefits from the free checked bag, $0 from the extra economy award space, and no benefit from spending on the card with its paltry 1x earning. That doesn’t justify the $95 annual fee.

I have a Citi Prestige® Card right now. For the next year I would expect to get:

  • $250 in value from the Air Travel Credit
  • $150 in value from the free golf rounds (retail value of $600+, but I would play cheaper courses in the absence of the benefit)
  • $150 in value from the lounge access (retail value of almost $1,000, but I wouldn’t pay that)
  • no value from the category bonuses; they’re awesome, but the Citi ThankYou® Premier Card has better category bonuses
  • $100 in value from increasing the value of the points earned on my Citi ThankYou® Premier Card

That’s $650 in value for me for a $450 annual fee. That makes the card an obvious keeper for me.


Hopefully you picked up on a few points.

  1. I don’t know whether you should keep or cancel the card. It depends on a lot of factors that only you know like how much benefit X is worth to you, how much a certain type of points are worth to you, and how much spending you put on your card.
  2. Cards on which you spend a lot come out well in the analysis.
  3. The more spending you do, the more cards you can justify keeping
  4. The wealthier you are the more you probably value a card’s benefits and points. The wealthier you are, the more cards you can justify keeping.
  5. Airline cards do poorly because they don’t offer good category bonuses, and their 1x return is always worse than the SPG card or Arrival Plus.


The idea is simple. Compare the marginal benefits of carrying a card for the next year to its annual fee. If the benefit is greater than the fee, keep it. If the fee is greater than the benefits, cancel it.

The trick comes in calculating the marginal benefits which requires valuing a cards’ perks, valuing each type of mile and point, and calculating how much spending you’ll do in various categories.

Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

The comments section below is not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all questions are answered.

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  1. Excellent analysis of the complicated decision making process. I bump up the Club Carlson card’s value from what you list because I always redeem at least two (usually exactly two) nights at a time, for which the last is always free if you have the card. Since it pays 5x on all spend, and I value the points at .7 cents, that makes it the most valuable for ordinary spend. Thus I let go the Starwood card.

    One more thing to bear in mind, though, is the $25 Small Business Saturday credit on any AMEX card (and maybe more if there’s an authorized user), which effectively reduces the annual fee by that amount for the purpose of doing all those other comparative calculations.

    • Yes, the Small Biz Saturday is definitely a consideration as are the AMEX Twitter promos. AMEX dominates this free-money space.

  2. I would differ only on the statement about airline cards. The Delta Amex Platinum card (not listed) gives a bonus of 10 Medallion Qualifying miles when you hit a $25,000 spend per year. It may not be much (and 25k may be a large spend if you have lots of other cards), but just having the card removes the financial requirement to get medallion status on Delta. For me, at least this past year, when travel spending has trended downward, having that restriction removed means I hit Silver by June, should have Gold by the end of the year, without havind spent the $25k on actual travel.

    • That’s a very niche card. High annual fee and you have to spend a lot on a card that earns 1 DL mile per dollar, which is a huge hit to value compared to 1 Starpoint per dollar. (I’d rate them as 1.22% and 2.5% back respectively.)

  3. Scott don’t you need to also consider the ability to get an identical card with a new sign up bonus which may or may not depend on whether you currently hold a particular card?

  4. Great analysis as usual Scott, I agree with @Wade though that the third factor needs to include whether the card ‘needs’ to be cancelled in order to get a signup bonus again. I have always had that factor play a role in my card cancel decisions, at least.

    • To me, this ability to get the bonus again is by far the most important factor. It seems to apply most directly to Amex (needs to be closed for 12 months) and Chase (2 years). The others are not so clear. But I would certainly rate an anticipated repeat signup bonus of 50-75k Membership Rewards points more highly than hanging onto a Gold or Platinum card for another year, getting the benefits / category spend, and paying the $175 / $450 annual fee. Same generally goes for the SPG cards and the Delta card family. Just canceled the Ink Plus yesterday so I can get the 50k again in 2 years. Will get the Ink Bold shortly to replace it. Logic may be a bit different on the Inks for those who use these with Vanilla / Bluebird / office supply store gift cards, but I don’t. With Barclays and Citi, I’m canceling after 8-10 months as I go to keep things simplified, but as I said unclear of the full impact.

  5. Minor edit: “The Hyatt card … Diamond status” should be “Platinum status”. It does however offer night credits towards Diamond status at spend thresholds.

  6. Also, what about the effect on your credit score? If I cancel a few cards that have high credit limits, won’t that have a negative impact on my credit utilization?

    Another question – if I have a business and personal version of a card (Starwood, in this case) and I want to keep one, which one is better to keep for my credit score?

    • Lynn,

      With Chase and some other banks you can move your credit for example, I recently canceled my southwest personal card and chase moved the credit line to my freedom card in less than 5 minutes. This kept my credit utilization the same. As for effect on credit score, business credit cards don’t affect your personal score with the exception of the initial credit inquiry when applying, so canceling the business version would not further affect your personal credit score.

  7. I also factor in how many “slots” are being used up per issuer. I’m at 5 personal for Chase and Citi, so that would be an additional negative against the bottom performer – I could make room for a new card with a big bonus and/or better category spend.

  8. Also, if you have an Ink just downgrade the Sapphire don’t cancel it. You still get the 2X dining and can transfer the points to partners through the Ink. As for SPG I’m on a churn one every year plan. Got the biz last August cancelled and got the personnel this year. I plan to do this as long as I can. I plan an app around the 30,000 SPG bonus.

    As for keeping a personnel vs a biz card. Keep the biz as the balance doesn’t show up on your personnel credit. If you cancel the personnel you will loose the credit line but could transfer that to another AMEX. Wait a year then get the personnel card again. No sense in having both at the same time unless you need the nights to qualify for status.

  9. Everything works fine, unless we hear over the phone that ‘annual fee cannot be waived and no special retention bonus is being offered at this time’, as I got such answer twice in a row this weekend when I spoke to Chase reps in regards to United Awards plastic. I was only able to downgrade it to some other United card (Explorer’s annual fee will be charged in 2 months) but the fee will be prorated. I guess, I’ll see shortly how much less (so far it was $60 per year) they will want to charge me. Technically speaking, the only reason I did not cancel it was the length of credit history. Apparently, I’ve had this product for the last 6 years or so:)

    • All cards sit on your credit report for 10 years even if you cancel them, so a 6 year old card isn’t necessary to keep unless you plan on holding it past 10 years.

  10. I have a United Mileage Plus SELECT card and a United Mileage Plus Exlporer personal card; do I really need this SELECT card anymore? Are there any benefits I get with the SELECT card that I don’t get with the Exlporer Card?

  11. There are so many cards out there that offer good bonuses that I rarely keep a card past the first year. Exceptions are: Marriott, Hyatt, IHG (free hotel nights) and one card that earns Chase UR points (unless a new one pops up, like the SP MC).

  12. DaveS, I am using the Carlson card heavily now, but am also keeping and using Starwood. The reason is that Carlson is not “trustworthy” – current benefits are not sustainable, and they have been known to change benefits without notice. So I don’t earn Carlson points unless I plan to use them quickly. I (and most bloggers) consider SPG much more trustworthy; I am much more comfortable banking large numbers of Starwood points.

    Scott, another airline card that is well worth keeping for retention bonus is the Southwest Visa Signature (both personal and business versions). The $99 annual fee comes with 6000 Rapid Rewards points – very fair value. The only reason I would consider cancelling this card is to get another 50,000 point bonus in two years – a big step towards another Companion Pass.

  13. Once, after getting the sign-up bonus, I decided that my UA MP Explorer card wasn’t worth it, so I called customer service. They asked me why I wanted to cancel, and I told them that I wasn’t getting enough out of the card to warrant the $95 fee. He kindly offered to waive that fee for my second year of cardmembership. Moral of the story: asking never hurts.

  14. Another thing to keep in mind is the extended warranty for prior purchases. I haven’t looked into this myself but I’m reasonably assuming that the extra year of warranty that most credit cards offer is no longer available once you cancel the card.


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