No More Business with Chase Southwest Business
Several weeks ago I reached the second anniversary of opening my Chase Southwest Rapid Rewards Premier Business Credit Card. With that anniversary came an annual fee for the card. And with that annual fee came my annual evaluation of whether to continue holding the credit card. A few weeks ago I chose to cancel it.
When I ran the numbers on this credit card a year ago I knew the value in the second year was not going to be outstanding. It rarely is. The big value comes in the first year from the big signup bonus. But with the fee waiver I negotiated for Year 2 it was worth keeping for a second year.
Checking the Score
Over the past 12 months I charged about $13,200 to this card and earned almost 28,000 points. I value Southwest Rapid Rewards at $0.02 each, or 2 cents per point (cpp). That's a high rate because I factor in the value of the Companion Pass which these cards help me earn. Without that the value would be 1.4cpp. Using the higher 2cpp figure the points I earned are worth $560. The net annual fee was actually $1 in my favor, as Chase offered me a retention bonus of $100 in exchange for paying the $99 fee a year ago. That lifts the card's value in the past year to $561.
$561 isn't the bottom line, though. In analyzing all these affinity credit cards (i.e., cards that pay bonuses in points with various airline and hotel programs) I apply an opportunity cost. If I'd placed the same charges on one of my no-annual-fee, 2% cash back cards I would have earned $264. Thus my net gain from using this card is $297.
$297 is a pretty good net score for a credit card in an out year. It validates my decision a year ago to keep the card. Whether to keep it for next year was a different decision, though. For that I had to project the card's value over the next year and the desirability of alternatives.
Why I Canceled, What's Next
Long story short, I canceled the card a few weeks ago because I asked for a fee waiver again and was declined. Without a fee waiver the card's projected net value over the next 12 months drops below $200. That's not a good enough return in exchange for paying a nearly $100 fee.
"Oh, look, here's $200 on the floor. I don't want to pick it up! 🤪" one of my relatives teased when I briefly explained how this credit card churning game works. Sure, it was a funny one-liner, but it showed he failed to appreciate more than the most superficial numbers. Two things:
The second factor was also a big reason behind why I canceled this card now. It frees me up more to pursue opening another Southwest credit card with Chase Bank. That new credit card will carry a big signup bonus. That will not only be worth a lot more than keeping this old card; it will also help me requalify for that Companion Pass which lifts the value of all the points I earn. So that's my plan: I close this old card and will open a new one later this year.
[This entry was cross-posted from https://canyonwalker.dreamwidth.org/90922.html. Please comment there using OpenID. That's where most of the action is!]
When I ran the numbers on this credit card a year ago I knew the value in the second year was not going to be outstanding. It rarely is. The big value comes in the first year from the big signup bonus. But with the fee waiver I negotiated for Year 2 it was worth keeping for a second year.
Checking the Score
Over the past 12 months I charged about $13,200 to this card and earned almost 28,000 points. I value Southwest Rapid Rewards at $0.02 each, or 2 cents per point (cpp). That's a high rate because I factor in the value of the Companion Pass which these cards help me earn. Without that the value would be 1.4cpp. Using the higher 2cpp figure the points I earned are worth $560. The net annual fee was actually $1 in my favor, as Chase offered me a retention bonus of $100 in exchange for paying the $99 fee a year ago. That lifts the card's value in the past year to $561.
$561 isn't the bottom line, though. In analyzing all these affinity credit cards (i.e., cards that pay bonuses in points with various airline and hotel programs) I apply an opportunity cost. If I'd placed the same charges on one of my no-annual-fee, 2% cash back cards I would have earned $264. Thus my net gain from using this card is $297.
$297 is a pretty good net score for a credit card in an out year. It validates my decision a year ago to keep the card. Whether to keep it for next year was a different decision, though. For that I had to project the card's value over the next year and the desirability of alternatives.
Why I Canceled, What's Next
Long story short, I canceled the card a few weeks ago because I asked for a fee waiver again and was declined. Without a fee waiver the card's projected net value over the next 12 months drops below $200. That's not a good enough return in exchange for paying a nearly $100 fee.
"Oh, look, here's $200 on the floor. I don't want to pick it up! 🤪" one of my relatives teased when I briefly explained how this credit card churning game works. Sure, it was a funny one-liner, but it showed he failed to appreciate more than the most superficial numbers. Two things:
- First, the $99 annual fee is cash. Cold, hard cash. The benefits are in points, which I have to try to make worthwhile in the future. I want more than a 2:1 return when I'm spending cash up front to get points on the back end.
- Second, the question is always, "Compared to what?" You've got to understand the alternatives. If by picking up $200 here you miss an opportunity to pick up $600 there, you've chosen poorly.
The second factor was also a big reason behind why I canceled this card now. It frees me up more to pursue opening another Southwest credit card with Chase Bank. That new credit card will carry a big signup bonus. That will not only be worth a lot more than keeping this old card; it will also help me requalify for that Companion Pass which lifts the value of all the points I earn. So that's my plan: I close this old card and will open a new one later this year.
[This entry was cross-posted from https://canyonwalker.dreamwidth.org/90922.html. Please comment there using OpenID. That's where most of the action is!]