Tuesday, February 4, 2014

Retention Offers

It's February 2014 and my family has now been playing this travel reward credit card game for the past two years. And even at 2 years old, I have been benefiting from their financial discipline and resourcefulness.

Big warning! If you have any outstanding debt at all (student loans, credit card, personal loans or mob gambling debt), then you're better off not opening more credit cards, because you're probably spending more than you're making and ruining your future. The interest charges alone will destroy any point/mile value you may receive. The last thing you need is another credit card.

While the miles/points game can allow an ordinary person to stretch their limited dollars to travel well beyond their usual means, it is definitely not a "free" game to play. For example:

1. Round trip business class flights to Europe this summer using United miles still cost us $163/person in taxes (vs. retail $4,000+/person).

2. 6 night stay at the Conrad Koh Samui in Thailand was all on Hilton points, but we still had to pay overpriced hotel prices for our daily meals on the property which came out to about $25/person per meal (vs. retail $850/night x 6 nights for the room).

3. Having over 20 active credit cards currently open that all offered a lucrative sign up bonus (50,000-100,000 miles/points) as well as bonus spending categories (2x-5x per dollar charged) gets us a lot of loyalty program currency, but many of these cards also charge $95+ annual fees after the 1st year. Assuming half of our cards have annual fees, that's ~$950 in fees for the privilege of using them for another 12 months.

Of course, there's not much my father can do about the cash cost for #1 and #2, but he can mitigate much of #3 by just getting a hold of the Credit Card Retention representatives.

There's a lot of discussion in the blogosphere about credit card Sign Ups. That's primarily because the bloggers get paid by the credit card companies to get people to sign up for their cards. Not me of course - I'm only 2 years old. I only talk about the cards that my parents sign up for and/or use for illustrative purposes. I don't really care if you get a card or not.

But while there's a lot of public attention around the card sign up, there's little said about the other end of the spectrum - the card cancellation. This end is where my father's OCD nature gets us the proverbial "second bite at the apple."

February 2014 Cancellations
Last February, my parents had their Credit Card Churn (signing up for a lot of credit cards at the same time).
  • Some of these new cards were No Fee cards, which meant we could keep them open forever. 
  • However, many were only waiving the annual fee for the first year, then $95/year each and they weren't worth keeping for another year if we had to pay the fee. 
  • In addition, there were a few reward cards we had for a few years because they were great to keep around, even after paying the fee.
In total, we had 7 cards coming due for their annual fee.

A. Starwood Preferred Guest Amex ($65 annual fee)

If you've been reading LCD for a while, you'll know that this card is my father's all time favorite. He uses this for all his non-bonus spending (anyplace where he would only earn 1x points). It's really the only way to accumulate a significant number of SPG points, because actually staying a night at a Starwood hotel doesn't get you that many points.

He's had this card since 2009 and has been paying the $65 annual fee since 2010 (after his 1st year). For him, it's been worth it because he accumulates SPG points, gets 2 stays/5 night credit towards his SPG elite status each year and is an American Express card. As you may know, Amex often runs several amazing promotions each year (such as Small Business Saturday) that will save you significant money, especially since the promotions are available to each unique Amex card (even if the cards are authorized users under the 1 master account). Since we have 3 authorized users under my father's account, we get the promotional benefit 3x, even though we pay just one $65 annual fee.

But on February 2, the 2014 annual fee posted to his account. While he had NO real intentional of cancelling the card, he called the number on the back of his SPG Amex and got an account representative.

Father: "I just got charged the $65 annual fee. I'm not sure I'll use the card enough this year to be worth the fee. I think I'd like to cancel."

Rep: "I see, well, you've had the card since 2009 and you've been using it quite actively. Let me transfer you to our account specialist who can see what they can do for you."

Specialist: "Sir, this is one of the best cards for earning points and miles. It's the only card that allows you to transfer points to both American Airlines and Delta at a 1:1 ratio. And also, if you transfer in increments of 20,000 points, you get an additional 5,000 miles, which is a 1.25x ratio."

Father: "I understand, but I'm not sure that's worth paying the annual fee for. I've actually been using other cards that offer me better bonuses (like 2x) on my spending."

Specialist: "Sir, I'd hate to lose your business. I can offer you a $25 statement credit to partially offset the fee."

Father: "Um, I'm not sure that's of interest to me. Is there anything else you can offer?"

Specialist: "Well, Starwood allows you to buy SPG points. $35 for 1,000 SPG points. Instead of the $25 statement credit, I can offer you 2,000 SPG points, which would be $70 if you purchased them yourself."

Father: "Wait, to be clear, are you offering me the ability to pay $70 for 2,000 SPG points?"

Specialist: "No, sir. Of course you could always just do that yourself if you wanted, the 2,000 points would be a gift for keeping the card another year."

Father: "And paying the $65 annual fee."

Specialist: "Yes, sir."

Father: (deliberate long pause) "OK, I'll take that offer."

So for a credit card that he planned to pay $65 for and keep another year anyway, he received a bonus 2,000 SPG points, which are worth $50-70 to us based on our usual 2.5-3.5 cents/pt redemption history.

B. Chase United Select ($95 annual fee)

This card was another of my father's long time favorites (since 2009). In addition to earning 3x United miles on United.com purchases, it also earned him 1x Premier Qualifying Miles (PQM) up to $5,000 on United.com purchases. Many times, this extra perk of 5,000 PQM was the difference between getting to that next tier of status (Platinum in 2013 and Gold in 2014). Plus, it earns 2x on gas, groceries and restaurants and already comes with an automatic 5,000 United mile annual bonus each year you keep the card. And the fact that this card is no longer offered anymore makes it all that much more special to my father.

So under no circumstances would he ever cancel this card. However, we wanted to see if he'd be offered a retention bonus as well, so he played a little game of credit card chicken.

Father: "I just got charged the $95 annual fee. I'd like to cancel."

Rep: "I see, well, you have an outstanding balance of $XXX. Let me transfer you to a specialist."

Specialist: "Sir, I understand you'd like to close the account. I just want to remind you that this card is a great one for earning United miles. We don't offer this card anymore. As you know, you can 3x on United purchases as well as 2x on gas, groceries, home improvement stores. It also comes with 5,000 annual bonus miles which we've already sent to your account. In fact, this past statement you've earned over 24,000 United miles."

Father: "I understand, but I've been starting to use other cards for my travel spending, including many of your own Chase cards like the Sapphire Preferred"

Specialist: "Wow, yes, I see that you have several cards with us. Well, we'd hate to close your account so perhaps I can look in my system to see what promotions you're eligible for... I can offer you 2 additional United Club passes good for 6 months."

Father: "Um, I actually already have United club access for being a United frequent flyer. Is there anything else you can offer?"

Specialist: "Well, I can offer you an additional 5,000 United miles. If you wanted to purchase that yourself, it would be well over $100 cost."

Father: (deliberate long pause) "Wow, OK. That's very generous. I'll take that offer."

So for another card that he was already willing to pay the $95 fee for, he received another free 5,000 United miles, worth about $100 to us, especially since my father's United account was wiped out after our redemption last week.

C. Citi American Airlines American Express ($95 annual fee)

Unlike the first two, this card was completely expendable after we earned 50,000 American Airline miles for the initial sign up a year ago. This card was my mother's account, and my father already had one in his account. So no need for duplicate benefits (free checked bags, priority boarding) for the same airline that we hardly fly anyway.

Of course, we'd gladly keep the card if the $95 fee were waived or we received an offer worth more than the fee. Since we don't really fly American Airlines, it's hard to keep my mother's AAdvantage account active without doing something excessive (buying something we don't need or donating miles). Otherwise, after 18 months of inactivity, the account closes and the miles are wiped out. But spending a bit on the card every so often adds miles to her AAdvantage account and resets the expiration date by another 18 months.

Father: "I opened this card about a year ago and I know I'll be charged the $95 annual fee. I'd like to close the account before the fee hits."

Rep: "I see, well, you have 30 days after the fee actually posts to cancel without paying it, but let me transfer you to a specialist."

Specialist: "Sir, I understand you'd like to close the account. [insert review of the card benefits here] "

Father: "I understand, but I'm not sure I want to pay another $95 annual fee."

Specialist: "Well, let me see what promotions we're offering. I can offer you a 2 part promotion. First, we give you a $95 statement credit which will offset the fee, but you have to still pay the fee normally. The statement credit will automatically be processed. Second, there's a special bonus offer for an extra 1,000 AA miles for each month that you spend at least $1,000 for the next 16 billing statements."

Father: "So what happens if I spend $1,000 in March, but then the $95 statement credit posts, bringing my total below $1,000."

The Specialist repeated the original terms verbatim, but didn't actually answer the question. After 2 iterations, she finally understood.

Specialist: "Oh I see, well, you'd still get the 1,000 mile bonus" (but she sounded very uncertain)

Father: "Well, OK. I'll take that offer."

Since there was a $95 statement credit to offset the fee, keeping the card for another year was a no brainer. It gave my mother an easy way to keep her AAdvantage account active as well as retained a lot of Available Credit with Citi, so that we could use it as leverage to trade in when we applied for future Citi cards. The fact that we'd essentially earn 2x AA miles for $1,000 of spending each month was a nice plus, but not overwhelmingly amazing. We'll see if we take full advantage of that or not.

D. Citi American Airlines Business Mastercard ($95 annual fee)

While my mother had the Citi personal card version, my father had also applied for the Citi business card version at the same time last February. While the sign up bonus at the time was only 35,000 AA miles, it was the best Citi business card offer at the time, so he decided to apply for it anyway.

Similar to before, the benefits of this Citi AA card was also 100% duplicative with the personal card versions, so there was little reason to keep the card if we had to pay another fee. However, since it was a business card, the available credit didn't count for my father's personal credit score. So keeping it or closing it, wouldn't impact it at all.

Father: "I opened this card about a year ago and I know I'll be charged the $95 annual fee. I'd like to close the account before the fee hits."

Rep: "I see, well, we do have other no fee cards that we can convert this into, including our Thank You card where you'd earn Thank You points. That one has no fee. I can transfer you to our specialist to handle that for you."

Father: "Hmm, are there any other options?"

Rep: "You can close the account outright."

Father: (after some thinking about converting the card) "Actually, I think I'd to close the account." My father actually wanted to be transferred to the specialist who would have the authority to make additional (better) retention offers. Then if he had to, he would close the account. While he thought about downgrading to the no-fee Thank You business card, he opted against that since it would then make him ineligible for getting a sign up bonus on that card later on.

Rep: "OK, let me transfer you to the specialist."

After a 2 minute hold, the original representative got back on the line.

Rep: "There wasn't a specialist available, but I have authorization to close the account, so I've done that for you. Do you have any other things I can help you with? "

Father: "No, I'm all set. Thank you."

While not the ideal outcome, my father wasn't too concerned about the account closure since he was 100% prepared to cancel the card anyway. But lesson learned that sometimes when you play chicken, you can lose.

E. Barclays US Airways Mastercard ($89 annual fee)

My father signed up for this card because (a) it was a Barclays card and we had too many Chase/Citi/Amex cards, (b) US Airways was set to merge with American Airlines and the miles would be consolidated and (c) there was times when flying US Airways was our best option since they were currently in the Star Alliance with United and we could credit the miles to United or Aegean Airlines.

In addition to the 2x on US Airways purchases, the card also offered priority check in and priority boarding (but no free checked bags). The other perks were a set of $99 Companion Pass and Lounge Passes. We ended up using the $99 Companion passes for a flight to Austin last month but ended up never needing the lounge passes (which will expire at the end of this month) because we got access to the US Airways lounges using our expired American Express Platinum cards.

For paying the $89 annual fee this month, we'll get another set of Companion Passes and Lounge Passes, but now that US Airways will leave the Star Alliance on March 30th, we'd no longer be able to credit our flights to United or Aegean. Thus, no more reason to fly US Airways. Upon reading reports, it seemed that many Barclay representatives were willing to waive the $89 fee with little/no discussion. So my father was hopeful.

Father: "I opened this card about a year ago and I know I'll be charged the $95 annual fee soon. I'd like to close the account before the fee hits, because I'm not sure what will happen to this card after the American-US Airways merger."

Rep: "I see that the charge will be posted on February 28th. I can transfer you to the specialist who will be better suited to explain everything about the merger."

Specialist: "Hi, sir, let me first tell you about the merger. The merger was completed late last year but the airlines will continue to operate independently for another year. Accordingly, their frequent flyer programs will also continue to be independent through 2014 and will be combined sometime in 2015. As such, Barclay will continue to service this US Airways card for the next year. But if you'd like to avoid the fee, I can permanently eliminate the fee on the card. You will continue to earn US Airway miles."

Father: "Really? So no fee ever?"

Rep: "That's correct."

Father: "Wait a minute. Will I still have the same version of the card or will I be getting a new card with different benefits?"

Rep: "You will no longer get the companion passes or priority boarding..."

Father: "But will I still earn 2x miles on US Airways purchases?"

Rep: "You will have the opportunity to continue accelerating your mileage balance through spending."

Father: "But will I still earn 2x miles on US Airways purchases?"

Rep: "You will earn 1 mile for each dollar spent on US Airways. You will earn 1 mile for each 2 dollars spent on other spending."

Father: "OK, let me think about it. I'll call you back."

The lesson here is that my father knew enough of the playbook to ask the right follow up questions. He was actually being offered to downgrade to a lower tier card (albeit a no fee card), but it was presented in a sneaky way to make it sound like the annual fee was simply being waived on his premium card. He decided to just call back later and hopefully get a new specialist who may be able to waive the fee on the higher end US Airways Mastercard he currently has. Additionally, by waiting until Feb 26 (the annual fee will post Feb 28), he will receive 10,000 anniversary US miles. While he doesn't plan on needing the US Airways benefits, he'd rather have it than not if it's free for another year.

But thinking further through this situation, we would ultimately give up and convert to the no-fee card if we had to, because it would keep an active account with Barclay (who is starting to offer some interesting new travel reward cards including the Arrival Card). Barclay is known to evaluate historical customer relationship length and card activity to approve new applicants. A 1 year history of opening/closing the one Barclay card wouldn't help his case for another future approval.

E. Chase Sapphire Preferred Visa ($95 annual fee)
F. Chase Hyatt Visa ($75 annual fee)

These cards fall into the same category, so we'll discuss them at the same time. My mother applied for the Sapphire Preferred Visa in February 2012 and already paid the $95 annual fee in 2013 because we needed at least one premium Chase Ultimate Reward card open to transfer to United or Hyatt. But this year, we had her Chase Ink Bold Mastercard as well as my father's Chase Sapphire Preferred card. Therefore, she was hoping to avoid paying another $95.

However, with the Sapphire Preferred, at the end of each cardmember year, we'd receive a 7% dividend on the UR points earned over the prior 12 months. So that's an additional 3,500+ UR points we are due in a few weeks. Since the annual fee didn't actually post yet, we would still have a few months to cancel the card without paying the fee.

Similarly, my father's Chase Hyatt Card offers an annual certificate for a free night at any Category 1-4 Hyatt hotel. I'd bet that my father would be able to find a hotel that would be worth more than the $75 annual fee, but it wouldn't be worth making a special trip just to redeem the certificate. Also, since we live in Manhattan where all the Hyatt hotels are Category 5 or 6, we couldn't use the certificate for friends/family to visit us either. But we'd rather have the certificate than not, so we'll wait a few weeks before cancelling to avoid the fee.

The ongoing benefit of the card is that it gives my father Hyatt Platinum status for as long as he has the card, but (a) Hyatt Diamond status is the top tier level you'd want, (b) we already earned Platinum status for 2014 from our 2013 stays and (c) we're focusing our hotel activity towards Starwood to keep top-tier status there. But who knows, maybe Chase will offer us a compelling retention offer to keep the card another year.

So for making a few phone calls this morning, my father got us:
  1. 2,000 SPG points
  2. 5,000 United miles
  3. $95 statement credit + bonus opportunity for an extra 1,000 AA/month
  4. Avoided a $95 annual fee
Not a bad haul for 0 hard inquires on his credit report. Then for the other three cards with annual fees coming due soon, we'll let you know in a month!

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