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Sunday Reader Question: How to Keep Amex Points While Avoiding an Annual Fee

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Update: The offer mentioned below for the Platinum Card from American Express has expired. View the current offer here

TPG reader Andrew wrote in this week:

“I was wondering whether you could help me with an Amex issue…specifically what to do with my Amex Membership Reward points. I currently have a Premier Rewards Gold Card and the annual membership fee is due in August 2012. I’m currently in between jobs, so I am trying to avoid paying the $175 fee. However, I do want to retain my Membership Reward points. If I cancel my Premier Rewards Gold card, I will lose my points unless I do one of the following:

1. Downgrade to a new charge card (i.e. Gold or Green).

2. Apply for a free Blue card. In both instances, I can transfer my points to the new card.

If I go with option 1, I will have to pay a fee ($95+), something that I’m trying to avoid. If I go with option 2, I will not be able to transfer my points to a frequent flier or hotel rewards program, which is obviously something I will want to do. If I knew where I needed the points, I would transfer them right now and just cancel the card outright. But at this point, I’m not sure where to transfer them since I’m not planning and trips in the near future.

Any suggestions would be greatly appreciated on how to resolve my issue!”

With Amex points, you can’t have your cake (no fee) and eat it (transfer to Membership Rewards partners) too. However, if you downgrade to a Blue card, you can continue to earn 1 point per dollar spent (two with Amex travel).

Your points will be safe and then when you have enough to transfer to a partner, you can see if there are any offers for Premier Rewards Gold, Gold, or Platinum that have the first year annual fee waived. If not, you can always renew your annual fee and if you decide to cancel the card, Amex will give a prorated refund of the fee you paid.

Risks
If you downgrade to a Gold or Green card, it may exclude you from any Gold card bonuses in the future. Generally Amex will let you downgrade, but they won’t incentivize you by giving you a sign-up bonus when going to a lower level card. Granted, the Gold card sign-up bonus right now is a whopping 0 points anyway, but if in the future that increases, you may be ineligible if you already have/had the card.

Another risk is incurring a potential credit pull and not getting anything back (like a sign-up bonus) for that pull. If you upgrade/downgrade between charge cards a charge card (pay in full), like the Premier Rewards Gold, to a personal credit card (ability to pay over time), like the Blue card, it’s possible Amex will initiate a hard credit inquiry since there is more risk involved with having a credit card. However, you should still keep the same “Member Since” date and online login information, though your Membership Rewards points will become Membership Rewards Express points, good for only cash back/merchandise at about 1 cent per point or less. If you were then to get the Premier Rewards Gold, Gold or Green card in the future, your Membership Rewards points would then be good for transfers to Membership Rewards’ transfer partners again.

A Different Option
If you don’t want to pay the $175 annual fee you can always call and explain your situation and see if they will waive the annual fee or give you a points bonus that might be worth even more than the fee. It never hurts to ask!

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