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What You Need to Know About Retention Offers
Do you have a credit card that you’re thinking of closing? Make sure to ask the bank for a retention offer first to get lucrative incentive to keep the card alive for a bit longer.
Closing a credit card reduces the length of your credit history, which will negatively impact your credit score. But, there will be times when a card won’t bring as much value as it used to have. This is why retention offer can sway your decision to keep the card while extracting value to justify keeping the card for at least another year.
What Is A Retention Offer?
Credit card retention offers are incentives given by the banks to their customers in order to convince them to remain as their customer or to make sure that they keep using certain products. The offers can vary from:
- reduced or waived annual fee for a year
- a lump sum of points or
- a lump sum of points with a minimum spend requirement in a number of months, just like a mini signup bonus
Why would banks give Retention Offers in the first place?
Surely the banks don’t run a charity. Once you’ve opened a credit card, you’re agreeing to a business contract with the bank, in which both parties should aim to be beneficial to each other. But of course, our goal is to win more than the banks!
The banks, or credit card issuers, make money from credit cards through:
- card swipe fees
- annual fees
- interests paid from carried balance
- unredeemed miles or poorly optimized redemptions
All of the above reasons are why banks would LOVE to keep the average person as their customers. From a business standpoint, the people who are attuned with the credit card hobby or the points & miles game cause banks to lose money because they don’t pay interest and redeem their miles and points effectively. But, they still do bring in revenue to the banks through annual fees and the fees whenever they buy things with their credit cards.
Some credit card issuers like American Express base more of their revenue model through credit card swipe fees and annual fees rather than betting their customers to carry a balance. It’s no surprise that American Express is the issuer that’s likely to give you a retention offer for keeping an American Express card opened due to the mentioned reasons. Nonetheless, you should always ask for a retention offer no matter the card issuer.
How to Ask For A Retention Offer
Asking for a retention offer works by simply starting a phone call or an online chat, if available, to the bank. I like to start the process on how I’m considering about closing the card and ask if there are any retention offers available.
Once you’ve asked for a retention offer, the bank, and I’ll use American Express as an example, will remind you of the benefits of the card you’re trying to close and they’ll try to encourage you to keep opening it. This is where you’ll make the case on why the card’s no longer worth it for you. Of course, this works much better on cards with an annual fee. You can try saying in the lines of:
- “I don’t use x/y/z benefit(s) at all/enough.”
- I won’t be traveling as much this year.”
From there, the bank may or may not offer you a retention offer. If they do, they may try to lowball you in which you may have to barter. From the bank standpoint, they want to keep your for as low cost as possible. You can simply say:
- “Are there any other offers?”
- “I don’t think that will be enough for me to keep the card opened.”
If the support rep offers another retention offer that will satisfy you, then feel free to take it. Then, the rep will read out or type out the requirements you must agree and meet in order to get the retention bonus. They’re nothing too difficult to follow, and they come in lines of keeping the card opened for at least another 12 months, and if there’s a spending requirement, make sure that there’s no sign of gaming, like manufactured spending.
What if they say no?
However, there can be times where the rep does not offer anything great or at all. That’s when you can try to change your mind about closing the card. You’re not locked in to the retention bonus agreement if you haven’t agreed to the terms and condition that the rep will confirm with you.
After that, you may try again the next day or so in hopes that another rep will give you a better offer. I would be careful about using this method too many times as they know how many times you’ve been asking for a retention offer for the same card, which can negatively impact your relationship with the bank.
There can be times where you just can’t win and leaves you with the choice of either closing the card or keep it open for another year or so. Closing a card will negatively impact your credit score, but if the card doesn’t contribute too much of your average age of credit, the impact will be lessened. That’s why you want to open a card that you’ll likely close in the later stage of the game after you’ve built a solid foundation of credit age with no annual fee cards.
Chances of Retention Offer
Some factors (anecdotal) that influence your likelihood of getting a retention offer are the amount you spend with the card and the card issuer themselves. The more you spend with the card, the more likely that you’ll get the offer since you’re bringing revenue through card swipe fees. But regardless of spend, some issuers are just stingier than others, in which you need to get lucky to get some sort of retention offer from them. Like I’ve mentioned earlier, Amex is one of the more generous one when it comes to retention offer because their revenue model leans more towards card swipe fees than leaning more towards people carrying credit card balance and paying interest.
My Anecdotal Experience
In my personal experience, I’ve recently asked for a retention offer for my Amex Platinum Card after its $695 annual fee has posted. At first, the rep tried to offer me $150 off the annual fee, but I felt that was too low. She then offered me a 55,000 Amex Membership Rewards points after spending $4000 in the first 3 months! Since I value Amex MR points at around 2 cents per point, I can get ~$1100 value out of this offer compared to the meager $150 off the annual fee.
Then of course, I took the 55k points offer. This point bonus alone can get me a one-way flight ticket to Tokyo from San Francisco in ANA First Class through Virgin Atlantic!
Whenever you’re thinking of closing a credit card with an annual fee, do make sure to ask for a retention offer first! A great one can score you a nice lump sum of points that you can use for another aspirational trip. Just beware of potential lowball offers and ask for another that will satisfy you. While you can win and get the offer you want, please understand that it won’t go the way you want all the time.