Convert Credit Cards Instead of Paying Annual Fees

Posted by Madison on August 28, 2013

When I recently shared my secret obsession with extreme credit carding, one of the comments was from a reader, Bill.

Bill, who shares my love of making money from credit cards, averages about $2k in credit card bonuses per year. Nice work Bill!

He pointed out that he is constantly cycling through bonus-offer cards, but he always cancels them after cashing out the bonus, since most have yearly fees after the first year. He wanted to know more about why I keep such large credit lines open.

While I do like to keep cards open if they offer cash back benefits in addition to the sign up bonus, the large credit lines also come in handy to keep my utilization low when I’m moving large balances for my credit card arbitrage.

But just like Bill, I do cancel cards I don’t plan to use regularly if they have an annual fee that kicks in after the first year.

Convert Credit Cards Instead of Paying Annual Fees

Wouldn’t it be nice if you could keep the cards open for the credit line, but avoid the annual fee and switch over to a card with cash back benefits while avoiding an inquiry?

I got a chance to test out a couple conversions this week when I called to cancel some cards from my $3,000 Credit Card Application Spree a year ago. The results were very positive:

  • US Bank FlexPerks: I cashed out my $175 bonus and called to cancel the card before the annual fee kicked in. I was immediately offered a conversion to the US Bank Cash Plus card.
  • Starwood: I earned $300 in Amazon gift cards and some free hotel nights from the 30,000 bonus point offer last year (which is back again for a limited time). When I called to ask about the annual fee they offered to convert my Starwood card to a Blue Sky card with no annual fee.

How to Convert

Cash Out All Your Points. To avoid forfeiting any points or cash back, I make sure to cash out all of my rewards before I call to cancel the card.

Reason for Closing. When they asked for my reason to close the account, I specifically stated that I didn’t want to pay the annual fee. Both companies immediately offered that I could convert to no annual fee cards.

Verify Details. Before I agree to convert, I verify all the details of the new card, including that the credit line will stay the same, the cash back on the new card, no annual fee, and no application or credit inquiry to convert.

Just Ask. If they don’t offer a conversion, before I go ahead and close the card, I make sure I ask if there are any other options for a card conversion.

Giving Up Bonuses

You might wonder why I would take a conversion on a card that offers its own sign up bonus. Shouldn’t I just close the card with the annual fee and apply for the no annual fee card?

I could, however, I like to complete two application sprees per year for myself (and two for my husband). During each of those application sprees, I like to apply for two cards from each issuer. There are so many cards that offer larger bonuses, I usually like to target those first.

In addition, I like to keep as many open Amex cards to take advantage of the annual Small Business Saturday credits!

Now, if they offered to convert my card to a card with a big $250 sign up bonus, I’d probably decline it!

Do you close your cards or convert them when the annual fee kicks in?

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Comments to Convert Credit Cards Instead of Paying Annual Fees

  1. I have always heard that opening and closing accounts so frequently can affect your credit score. It true, why would you want to do this?


    • Susan, my wife and I open and close as many as 10 credit cards a year, and our credit scores remain in the “very good” range. We probably do lose a few points because of it, but it’s a small price to pay for roughly $2,000 in free money. As we have no plans to take out any loans in the near future, monetizing our credit score is a no-brainer for us.


  2. Thanks for the tips, Madison!

    Some card providers don’t like issuing a second bonus card when one is still active, so I like the idea of converting to a different card product before the yearly fee kicks in. I wonder if that would also clear the way to reapply for the bonus card and keep the cycle rolling. I really wish I had more insight into the algorithms CC companies use internally to rate customers and target them for bonus offers.

    Recently, I have been seeing fewer $400+ bonus offers, and the spending minimums have been rising, so I have shifted my focus to cards with lower bonuses because they have a higher efficiency ratio (bonus divided by minimum spending requirement). Of course, the downside is a higher cycling frequency and having to cancel cards more often–unless I can make this card-converting thing work!

    Keep the good ideas coming!



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