How to Decide If You Should Keep or Replace Your Credit Cards

Many consumers have credit cards that they've kept for years, even if they're unsure why they still have them. Credit card annual fees, earn rates and benefits change on a regular basis. For this reason, it's smart to evaluate your credit cards regularly to determine if they're still a good fit for your wallet.

This article will walk you through the process of deciding whether to keep or replace your cards, tell you how to handle annual fees, and offer no-fee card alternatives if you're looking to avoid paying them.

How Often Should You Change Credit Cards?

You should review your credit cards on a regular basis, just like an annual job review.

The decision to keep or replace a credit card generally comes down to two questions:

-- Can you afford the annual fee?

-- Are you getting enough value to justify the cost?

If you can't afford the annual fee, it is a no-brainer decision to replace the card. Whether you are focusing on paying off your debt, saving up for a large purchase or living with a tight budget, paying an annual fee (even if the benefits are amazing) may not be a wise choice. In that case, you can replace the card or ask to downgrade it to a no-fee version.

For cardholders who can afford the annual fee, the answer is more nuanced. Keeping or replacing the card depends on the value of the card's benefits and how much you're earning in rewards on your spending.

Edward Pizzarello, a road warrior and host of the Miles to Go Podcast, recommends "a wallet checkup twice a year" to evaluate the benefits, your spending patterns and the card's annual fees.

[Read: Best Rewards Credit Cards.]

When You Should Change Credit Cards

If you're thinking about when to change credit cards, the best time to do so depends on how you use the card and if there have been any recent fee or benefits changes. If you're not using the card's benefits, its bonus categories don't align with the way you spend or the card's annual fee increased too much, it may be time to cancel or replace the card. Additionally, you'll need to ask yourself if the card's interest rate matches how you use it.

If the Benefits Don't Align With Your Lifestyle

Credit card benefits change on a regular basis, and so do your preferences. A card that was perfect for you a year ago may no longer offer benefits that fit your lifestyle today. For example, say that you used to live in Las Vegas and enjoyed visiting the American Express Centurion Lounge before every flight. But you moved to Nashville, Tennessee, and there is no Centurion Lounge available at your home airport. You may be able to enjoy the lounges if you travel through participating airports, but the value of that benefit is greatly diminished.

The Card's Bonus Categories Changed

During the early stages of the coronavirus pandemic, several credit card issuers recognized that people weren't traveling as much. The banks pivoted to offer updated bonus categories that aligned with staying at home, such as dining, groceries and gas. If you're still traveling regularly, though, it makes sense to look at the latest credit card offers to maximize your rewards.

Some travel credit cards now offer up to 10 points per dollar spent when booking travel through the issuer's travel portal. For example, you'll earn 10 points per dollar when booking hotels or rental cars with the Chase Sapphire Reserve or the Capital One Venture X Rewards Credit Card through their respective online booking sites.

[Read: Best Travel Rewards Credit Cards.]

The Card's Annual Fee Increased

Annual fees for some credit cards have gone up recently, as well. While the card may have been a good value at its previous price, it may not be with its new annual fee. Dave Grossman, a loyalty program consultant at MilesTalk.com, says that "getting value out of your card shouldn't feel like work. Some cards offer numerous benefits, but you have to work too hard to justify paying the annual fee."

The Platinum Card from American Express is a great example. It raised its annual fee to $695, which is partially offset by the introduction of new benefits like Equinox, Clear and Walmart+ credits. However, if you don't plan on using those benefits, you're now paying a higher annual fee without any increase in personal utility.

Pizzarello says, "An increase in annual fee is usually a good sign that a card may no longer be a good fit. Card issuers often add benefits at this time, but these benefits are generally less valuable than the ones that attracted you to the card in the first place."

The Interest Rate Is Too High

Ideally, you pay your balance in full each month, so you're not being charged interest. However, your card's interest rate matters greatly if you're carrying a balance from month to month. If you are paying off debt, you should look for a card that has a low interest rate or one that offers a 0% annual percentage rate promotional period for purchases or balance transfers. These promotions give you extra time to pay off your balance without being charged interest each month.

[Read: Best Balance Transfer Credit Cards.]

My Annual Fee Went Up. Should I Change Credit Cards?

When an annual fee changes, you have to look at the changes in benefits to figure out the answer to the question "Should I change credit cards?" For some people, the additional benefits are valuable enough to make the increase worthwhile. However, others may not like those extra perks, or, even worse, the card didn't add any benefits to compensate for the higher annual fee.

To evaluate whether or not to keep the card, focus on the value of the benefits compared with the new annual fee. If you are receiving enough value to cover the annual fee, then it makes sense to keep the card. Otherwise, cancel or downgrade it.

For example, take the Citi AAdvantage Platinum Select World Elite Mastercard and its $99 annual fee. Even if the annual fee doubled, it still might make sense to keep the card. Here's why: Like many other airline credit cards, it includes priority boarding, first checked bag free, and in-flight food and beverage discounts. With American Airlines charging airline baggage fees of $30 per person each way, you can quickly save enough with free checked bags to justify paying an annual fee. This card would save $240 in baggage fees on just one round-trip domestic flight on American Airlines for a family of four.

What Should I Do If I Want to Keep the Card, But Don't Want to Pay the Annual Fee?

Sometimes, you still like the credit card's benefits, but you can't or don't want to pay the annual fee. Before you cancel the card, make a phone call to the bank. Grossman says, "It's always worth a call to the credit card company to see what they can do." You may be able to get the fee waived or receive enough additional value to justify paying the fee.

When you call customer service, let the representative know that you like the card but don't believe that you're getting enough value for the annual fee. Ask if there's anything the issuer can do for you. The agent may have a retention offer available that can waive the fee, may offer a retention bonus or may be able to provide a temporary bump in rewards earned on your purchases.

If the annual fee isn't waived, you still may receive enough value from one of these offers to justify keeping the card. If the agent doesn't have any worthwhile offers, then you still have additional options.

You can request to downgrade the card to a no-fee version. This enables you to keep some of the benefits and continue earning those miles or points but without paying an annual fee.

If you still want to close the card, ask to transfer your credit limit to another card at that bank to minimize the impact on your credit score for closing the card.

No-Fee Alternatives to Popular Credit Cards

If you have a rewards credit card that charges an annual fee, but you don't want to pay the fee, here are a few alternatives to consider. Instead of closing your account, you can generally keep your card number, payment history and credit line by downgrading your card to one of these options. Just keep in mind that you won't earn a welcome bonus by downgrading your card.

The Bottom Line

If you've kept a credit card for many years, it may no longer be as valuable to you as it once was. Credit card annual fees, earning power and benefits change on a regular basis. It pays to review your credit cards at least once a year to ensure they are still a good fit for your lifestyle. For cards that no longer work for you, consider downgrading them to a no-fee version or replacing them with a card that is a better match.