Hate Paying an Annual Credit Card Fee? Make This 1 Move

Why spend money you may not have to?

The great thing about credit cards is that they allow you to earn different rewards or cash back on your purchases. Often, you can enjoy those perks without having to pay anything in exchange.

But some credit cards impose an annual fee on account holders. Annual fees can range in cost. In some cases, you might pay $95 to keep a credit card around. In other cases, your fee might amount to $250, or even more.

If you have a credit card that charges an annual fee, you may be tired of paying it. You may be inclined to cancel that card and replace it with another one that doesn't charge you money just to keep your account open. But before you go that route, there's another one worth considering.

You may have leeway with that fee

The problem with closing a credit card is that it could have a negative impact on your credit score. One factor that goes into calculating that number is the length of your credit history. If you close a credit card you've had open for years, it could eventually result in a shorter credit history -- which could cause your score to drop. That's one reason you shouldn't be so quick to close out a credit card.

Another reason is that credit utilization also determines your credit score. Credit utilization speaks to the amount of revolving credit you're using at once. If you close a credit card with a generous spending limit, your total credit limit will shrink. That could drive your utilization upward, hurting your credit score in the process.

That's why canceling a credit card with an annual fee may not be as painless a solution as you'd think. Before you do that, it pays to at least call your credit card issuer and ask to have your annual fee waived.

Why might a credit card company do that? It's simple -- they want to retain you as a cardholder. If you've been an account holder in good standing for many years, your credit card issuer may agree to cancel your annual fee or at least reduce it. It's worth asking that question.

Now if you're a newer account holder, this strategy may not work. To be clear, it may not work even if you've had the same credit card for a decade or longer. But there's no harm in asking, and getting that fee waived could allow you to keep a credit card you like otherwise, while protecting your credit score from taking a hit.

Are annual fees ever worth it?

Some annual fees are more than worth paying. Imagine that in exchange for a $95 annual fee, you're able to rack up $1,000 in cash back in the course of a year on one card, as opposed to racking up $500 in cash back for the exact same purchase activity on another card. In that case, the fee in question more than pays for itself.

It's when you're not getting anything back in exchange for paying that fee that you should consider canceling the card in question. But don't rush to go that route until you try getting that fee waived or lowered.