Why I Cancelled My AMEX Gold: Exploring My New No-AF Credit Card Strategy

When it seems like every credit card has some rewards program or special benefit, how is one supposed to know which card to use? If you can’t afford the annual fee, are there still valid credit card options with worthwhile rewards programs? Or are you stuck with the worst ones?

One person, in particular, was pondering this question exactly, and took their concerns to the people in the r/CreditCards community on Reddit, hoping to find valid and affordable alternatives to the expensive rewards-focused credit cards. We scoured through the replies to find the best ideas. Here is what they said.

Why Are We Talking About This?

It can be overwhelming managing your credit cards and their rewards and benefits. Part of this is intentional, as companies hope you sign up for a card and never switch. But you could be leaving points and other rewards on the table by not using some of the more popular credit card strategies. And with no annual fee cards, that strategy is essentially free.

The Original Question

The author of this post is trying to maximize their credit card rewards and points without paying the annual fee for their cards. This is common called the no-annual-fee strategy.

The author of the original post begins by saying they had just canceled their American Express Gold Card (with an annual fee of $250) because although they spend a lot on groceries and at restaurants, they don’t feel like it’s enough to justify the annual fee. They don’t travel a lot, either, so most of the benefits of the American Express Gold card don’t make sense anymore. Now, they have decided to go annual fee-free, and came to the community with a plan of their own creation, which uses only cards with no annual fee, to make it work.

The plan looks like this:

For restaurants: Chase Freedom Unlimited (with 3% for restaurants)
For groceries and online shopping: American Express Blue Everyday (with 3% rewards)
For Costco shopping: PayPal debit card (with 5% rewards)
For home utilities and streaming services: US Bank Cash+ Card
For gas and any foreign shopping: Costco Citi card

They asked the community to verify their plan or to suggest any alternatives or improvements.

Please keep in mind that everything in the original thread, including this article, are opinions. It is not a good idea to start playing around with credit cards (and by extension, your credit) unless you know what you’re doing and you are in the habit of reading the fine print of what you are agreeing to.

The Community Response

Most of the people who chose to respond agreed with the author’s strategy to combine separate cards that had no annual fee while still maximizing the rewards and points they would be able to accumulate.

Naturally, there were many users who recommended different cards based on their own level of spending in different categories. For example, if a user shopped at one particular store over another, then a card that had a higher rewards bonus for that store would make more sense over a card in the author’s strategy, but the principle remains the same.

That being said, the strategy the author came up with was rated as a very good strategy, and is a great foundation to use to build your own no-fee credit card list.

Now, don’t rush out and sign up for these cards right now. The author of the original post created this list to match their own annual spending habits. It is unlikely the two of you spend money in the same way, and with so many credit cards available to you, it is even more unlikely that the same cards will be as effective for you.

Some of the most common categories that credit cards focus on for points and rewards are:

• Restaurants and food delivery
• Travel (including Ubers, taxis, airfare, hotels, and more)
• Grocery shopping (sometimes limited to grocery stores and excluding supermarkets)
• Subscriptions and entertainment (streaming services, monthly mail orders, etc.)
• Gas and utilities
• Online shopping (Walmart, Amazon, etc.)

The balance of rewards and how many points you can earn in each category vary between cards, and especially between the paid version and free version of the same card. So, while you might spend a lot of money on restaurants if you spend more money than others on entertainment and subscriptions, it might make sense to sign up for a free entertainment-focused card, instead of a grocery card. Or, better yet, get two free cards to maximize the points in both categories.

Almost every major store offers its own version of major credit cards with rewards and benefits specific to its own shopping ecosystem (stores that have gas stations on-site will have good benefits for groceries and gas, for example), so it pays to visit your favorite stores or restaurants or services to see if they offer one.

One thing to keep in mind, of course, is that the rewards, benefits, and viability of any of these cards in a no-annual-fee strategy can change at any time. Some companies rotate where their cards are most useful, and can add or remove benefits or stores or new categories whenever they want. If you want to try maximizing your credit card rewards while paying no annual fee, like the author of the original post, make sure to do your homework to see if other cards have become better options for you and your personal shopping habits.

The people who like to maximize their credit card rewards will stay on top of these changes and cancel or open new credit cards if a card is better than the one they have for a specific category.

The question remains, then, why should you consider exclusively using cards that have no annual fee over just getting cards that have more benefits but an annual cost?

The No-Fee Lifestyle

Like it or not, the mere fact that you pay an annual fee influences your spending habits. You subconsciously (or consciously) feel the need to justify the annual fee by spending more money to maximize the benefits. Once the benefits you earn outweigh the annual fee, you feel as though you have made a profit, or at least made your money back. But this is an illusion.

Some people are able to maintain their usual level of spending with a card that has an annual fee and make use of the benefits, but for most people, this is not the case. Most people will increase their spending, usually spending much more than they would ever get back in points or rewards.

This makes sense when you think about it, why else would credit card companies offer such lucrative and tempting rewards? They more than make their money back on this little trick of human psychology.

By choosing to use only no-annual-fee credit cards, you remove that pressure from your usual shopping habits. Instead, you just have to pick which of the ‘free’ cards you have to use whenever you do go shopping. You don’t feel the need to use a monthly credit or go shopping when you don’t really need to.

Which Credit Card Strategy is Right for You?

Should you adopt a no-annual-fee strategy? Should you stick to just one credit card? Should you take up credit card churning? As with most things, the answer is ‘it depends’.

Credit card veterans (like those in the aforementioned subreddit) will tell you that chasing after the fee (meaning spending money just to make the annual fee worthwhile) is a terrible way to use your credit card. You should not pick a credit card based on which one has the highest points rewards, or which one has more benefits.

Instead, you should pick a credit card that has high rewards that match your existing spending habits.

Don’t travel a lot? Then don’t pick a card that is focused on travel benefits.
Don’t eat at restaurants? Don’t pick a card that has benefits based on eating out or food delivery.
Don’t shop at Costco? Then don’t get a Costco-based card.

The list goes on.

You might tell yourself that if you only had a card with good benefits for traveling, then you would travel more. But this is a trap. Not only will you not travel as much as you think, but you will probably end up spending more money than you can afford on top of the annual fee.

If you have two cards that match your spending habit but each is better in a different category, then it might be time to split your purchases onto different cards. Use the card with higher points rewards for travel on your taxi and Uber rides, then use your grocery-focused card exclusively for grocery shopping. If you only stick to free cards, then there is really no limit to how many categories you can assign a card to.  

Again, do some quick math to see if a free version or the annual fee version makes more sense. As an example, for a grocery-based rewards card, take your annual spend on groceries from the previous year, and multiply that by the percentage of each reward tier. If the amount of points you get back doesn’t exceed the amount of the fee for the card, then you should stick with the free version.

In the middle of such an analysis, you might discover that no card truly makes sense, or you don’t spend that much in any particular category. In this case (as well as in many other cases) a card that offers straight cash back instead of points might make more sense.

We have looked into how much each generation can expect to make with cash-back credit cards. If you don’t want to play games with cards and just want to earn easy money while you shop normally, we highly recommend reading our guides on which card to use.

Please remember, the more cards you have, the more likely it is to make big financial mistakes or abuse your credit. Only consider signing up for multiple cards at the same time if you take the time to responsibly take care of them, cancel and dispose of the old ones, and only use them responsibly. The trap of seeing credit card rewards as “free money” is a trap that too many fall into.

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