Don’t feel like paying your card providers’ annual fee? Tell them you’ll walk away and see what they do, writes John Collett.

Rather than blindly paying credit card fees when the bank holds out its hand, customers might be better off saying, “No”. Rewards credit card holders who spend up on their cards and have good credit histories can get their card providers to extinguish their cards’ annual fees.

A shadow shop using real consumers of card providers carried out for Sunday Money by financial comparison site Mozo shows most providers will offer incentives to stay if the cardholder threatens to walk away.

Six consumers with cards from a variety of providers threatened to close their accounts if they did not get their fees waived or reduced.

Of the six shadow shoppers, four were offered sweeteners. A NAB rewards card-holder implied he was going to cancel the card and switch providers. NAB waived his $200 annual fee for 12 months.

Another with an NAB Qantas Rewards Premium card with a $250 annual fee had the fees waived for a year after she said she was looking to close the card to switch to one from another bank with a lower fee. Cardholder offered points

A cardholder with an AMEX Platinum Reserve card, which is no longer available to new customers, with a $395 annual fee was declined a reduction in the fee but offered an extra 25,000 bonus points or a lower interest rate on the debt on the card for three months.

One of our shadow shoppers, rewards card holder Chandan Sharma, called his provider, a major bank, and implied that he would switch to another provider if he was not given a better deal.

The 34-year-old public servant was offered another of the bank’s cards with a lower annual fee, with the same benefits as his current card.

“I really did not expect to be offered a card with a lower fee,” Chandan says.

“When I received the offer I was surprised,” he says. It shows that you will not get sweeteners unless you ask, he says. Premium cards can negotiate

Premium card holders are in a much better position to negotiate than those with standard cards.

Credit card providers have always offered an array of incentives to new customers, but have not offered much to loyal customers, says Mozo director, Kirsty Lamont.

“But we are now seeing sweeteners being offered to existing customers,” she says.

Those with standard cards are much less likely to be offered sweeteners, she says. “Not all of our shadow shoppers were successful,” she says.

“It is not a situation where the same sweeteners are offered to everyone,” Lamont says. “But anyone with a premium credit card could, by just spending five minutes on the phone with their card provider, save a couple of hundred dollars a year,” she says.

Mozo has compared the dollar value of flights, cash-backs and gift rewards of the 115 rewards cards to find those offering the most value. Annual spend is $18,000, rewards $88

The typical annual spend on all types of credit cards is about $18,000. On this spend, the average rewards card delivers just $88 in value each year, the analysis shows.

One in five cards have such high fees and low value in rewards that the average spender will not earn enough in rewards value each year to outweigh the cost of the annual fee.

Lamont says rewards cards are marketed as delivering huge benefits, such as international flights and luxury hotel stays, but card-holders would need to be spending huge amounts receive these rewards.

With one rewards card, the card-holder would have to spend $64,000 a year to earn enough points to receive a $100 gift card, Lamont says.

She says card-holders should not be fooled by how many points each dollar of spending on the card earns.

Lamont says it is all about how the card issuer values its points and how many points need to be redeemed to get the reward.

For example, 50,000 points gives the card-holder 7.2 return flights from Sydney to Melbourne, but just 1.3 return flights on another card.

She says consumers should look for rewards cards aligned to an airline’s frequent flyer points’ scheme as they tend to deliver the best bang for the consumer’s buck.

Posted by John Collett – The Age on 8th August, 2015