Tips to Negotiate Retention Bonuses

Retention bonuses are a great way to help justify the annual fee that you will need to incur every year. Ideally, you would sign up for a credit card that waives its first year fee, collect the sign up bonus, and then decide whether to keep the credit card when you are entering the second year and the annual fee kicks in. One incentive is a retention bonus, which is a bonus offer issued by a credit card company to entice you to retain the credit card, rather than cancelling it. Generally, you want a retention bonus that will help you cover the annual fee.

In Canada, most retention bonuses are on a case by case basis. Rarely do you see system wide offers that everyone can see. I have been pushing for more system wide retention bonuses, which will decrease the need for churning.

Since retention bonuses are not available to the public, you will need to negotiate with the credit card company on a case-by-case basis. Below are some factors to keep in mind when you are negotiating.

1) Annual Spending

It is no secret that the more you use your credit card, the more profitable of a client you are. By having a high spending during the year, you will have more leverage to get yourself a better retention bonus. If all you did was sign up for the credit card, meet the minimum spend requirement to qualify for the sign up bonus, only to put it away in your drawer for the remainder of the year, then you will probably be out of luck when renewal comes around.

2) Length of History

This applies more for people who have kept their credit card for a while now, and never taking advantage of retention bonuses. If you had your credit card for a while, you do have more negotiating power. Be tactful about it though, because it could work against you. If they see that you’ve been a client for a while, they will expect that you will keep the credit card anyway, even without the retention bonus because you never negotiated it for it before.

3) Call 2 to 3 Months Before Your Annual Fee is Due

You want to give yourself some time to prepare to cancel the credit card before the annual fee kicks in. Also, you may need to try a few different agents. So if you don’t have any luck with an agent, you may wait a few days and try your luck again.

4) Speak to a Retention Specialist or Cancellation Team

The regular customer service representative usually has limited authority to offer you a decent retention bonus. You will generally get a better offer with a specialist. So be sure to be transferred over to them. But again, it can be a hit or miss with certain agents, so you may need to try a few times or move it up to a manager.

5) Be Genuine, No Need to Threaten to Cancel

You don’t need to be too direct about threatening to cancel. Think about it from their perspective, if they find that you are very serious about cancelling anyway, they won’t want to put in the effort to try to keep you, because they will just expect that after you get the retention bonus, you will cancel it shortly after anyway. Be genuine about keeping the credit card if you get the right offer. The offer may be sufficient to keep you around another full year. If you are a big spender, it will be worth it to them. If you show a lot of volatility over the phone, they will sense it, and they will just make it easy for you to cancel instead.

Remember, credit card companies are usually already making a lot of money, losing a few clients here and there is not a big deal to them. They rather keep clients who actually want to be a client.

6) Calculate the Retention Bonus

For example, if they fully waive a $120 annual fee, you know dollar for dollar what value you are getting. But let’s say they offered 10,000 bonus Aeroplan miles instead. I value Aeroplan miles at 1.6 cents a piece, which is worth $160 instead.

7) Track Retention Bonus Offers

You want to compare and leverage retention bonuses against each other. For example, let’s say you had 2 similar credit card with 2 credit card companies, but you only wanted to pay 1 annual fee. Get the offer from each (this is why you call ahead of time, so that you have some time to decide), and then leverage them against each other. Explain to them that you will only keep 1 of the 2 credit cards, so you will go with the company that gives the better offer.

8) Act in Good Faith

If they offer you a decent enough bonus, take it, and actually keep the credit card for the full year. Don’t necessarily cancel just a few months afterwards. You want to build a nice history with every credit card company, so that you have better leverage in the future. Who knows, they may even give you a better retention bonus the following year, because you actually kept the credit card the full year.

Any other tips that you would suggest?