Spending Challenges — What Are They? Why Do You Ask for One? How Do You Fulfill Them?

Based on comments I’ve read on the blog and Twitter, some people will cancel at least one Delta Amex because of the cards’ higher new annual fees and benefit structures. (Remember, you can still enjoy a year of the current, lower annual fees if you sign up before January 30, 2020. And there are some very nice welcome bonuses available — especially for the personal cards — through October 30.)

Before canceling a card, though, there may be an option to consider: a retention offer commonly referred to as a “spending challenge.”

What is a Spending Challenge?

A sort of last-ditch effort credit card companies sometimes offer people wishing to cancel cards is a “spending challenge.”

A rep may say something like, “We’ll give you X points if you spend Y dollars within three months from today.”

It’s essentially the same practice as a welcome bonus. (The offers aren’t as good, though.)

When and How to Ask for a Spending Challenge

When your annual fee statement hits, call your credit card company. Tell them you want to cancel your card.

You can call months ahead, sure. But I generally wait until the annual fee shows up — and use that as my reason to cancel (because it usually is).

Tell the rep you’re cutting back on expenses (especially if the annual fee has increased). Or if the card has somehow devalued (loss of benefits, etc), that’s certainly a valid reason to cancel a card.

Or tell them you really like a competitor’s card because it’s more affordable, has better benefits, whatever.

For example: “Amex, I love the American Express® Gold Card. You know, the annual fee was $195 when I signed up. Now it’s $250. So, yeah. It’s time for me to switch to a more affordable Chase card. Maybe the Chase Sapphire Preferred® Card card. Or a no annual fee card like the Chase Freedom.”

You get the point.

They’ll give you a hard sell about the benefits you’ll miss (“The airline incidental credit! The 4X at restaurants and supermarkets!”) how much they love you as a customer, will name their firstborn after you, that sort of thing.

The rep will probably ask if there’s anything he or she can do to change your mind.

Why, yes there is!

First, ask if they’ll waive the annual fee.

If the rep can, great. Say “thank you” and accept the offer.

But if they can’t entirely waive your annual fee, they may offer to reduce it. At that point, you’ll have to decide for yourself if the offer is worth the money. If it’s not (or they decline altogether to waive or reduce your annual fee) ask if there are any spend challenges.

If a spending challenge is available (and they aren’t always an option) you might get a couple of different options presented. (They may also tell you there’s nothing they can do and proceed with canceling the card — unless you tell them to wait.)

One may be something like, “If you spend $1,000 during the next three months, we’ll give you 10,000 points.”

But they’ll probably also have something more aggressive up their sleeve.

The company may offer some bonus points/miles upfront just to entice you. For example, “I can deposit 5,000 award points into your account now. And if you spend $5,000 in the next three months, you’ll get another 20,000 bonus points, so a total of 25,000.”

You can then decide if the spending challenge is worth it — or if you want to downgrade the card to a no-annual-fee version (if available), cancel the card, or pay the annual fee another year. (Or hang up and call back, and see if you get someone different on the line and go through the process again.

If you accept the spending challenge, you still must pay the annual fee and any other statement charges on time. Rest assured, your credit card rep will gladly accept payment over the phone.

Determining if a Spending Challenge is Worth the Offer

Be ready for some quick math when you’re presented a spending challenge. (In fact, it can’t hurt to have a pen, calculator, and some paper before you start the call.)

The quick and easy way is to think of each mile/point worth one cent.

That being said, most points/miles currencies are worth a cent each at the very least (when you redeem for cashback or most travel). Some — like Amex Membership Rewards and Chase Ultimate Rewards® — can be valued higher (about 1.4, 1.5 cents each on the low end).

So take that into consideration when doing your spending challenge math.

In our above example, the 25,000 points is worth at least $250. And because the product in our scenario is the American Express® Gold Card, I’d say the 25,000 points could be worth closer to $350 — which more than covers the annual fee.

Make sure, though, you can meet the spending challenge — otherwise, you’re wasting money and time.

So how do you complete the challenge?

Meeting Minimum Spend

Spending challenges aren’t meant to be easy. They may seem expensive or difficult.

That’s why they’re called “challenges.”

But we’ve covered many ways you can knock out minimum spend requirements for your new credit cards. (Here’s our most recent edition.) The same ideas pretty much apply to spend challenges, too.

The upcoming Chicago Seminars are a great place to hear other points and miles enthusiasts share ideas about knocking out spend requirements — there’s always some expense you never thought of or something will jog your mind.

I’ve always completed spend challenges when they’ve been offered. But I’m also not afraid to downgrade or in rare instances, cancel — a card if a spending challenge isn’t available.

Questions? Your Experience with Spending Challenges?

Have any questions about credit card spend challenges? Or do you have some experience with them and wish to share some tips with fellow readers?

Tell us in the Comments section below!

—Chris