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With credit card churning, it’s common practice to cancel a card before the annual fee is due in the second card member year. The cancellation period varies by card issuer, but generally you have some grace period to get the annual fee reimbursed after it posts to your account. However, based on a law in Massachusetts, you may be entitled to a full or partial refund at any point during the cardmember year.

The Law

According to Part I, Title XX, Chapter 140, Section 114C of Massachusetts General Laws:

A card issuer as defined in section one of chapter one hundred and forty D, whether located within or without the commonwealth, may assess an annual fee provided that the cardholder as defined by said section one, is notified of the amount of any such fee on or with the billing statement for the billing period prior to that in which the annual fee is billed to the cardholder’s account. A cardholder may cancel his credit card agreement at any time during this period without penalty. If the cardholder cancels the agreement at any other time during the year, he shall receive a refund on a pro-rata basis of two-thirds of the annual fee.

So what does this mean in practice? It sounds like you can cancel your card at anytime during the billing period that the fee was charged for a full annual fee reimbursement. Any time after that, and within the cardmember year, you can get 2/3 of the annual fee back.

An Example with American Express

I’ve had the SPG credit card from Amex for almost two years. I recently opened the SPG Luxury card, so I decided to close my regular SPG card a few weeks before my cardmember anniversary. Thanks to Section 114C, I received a statement credit that was approximately 2/3 of the $95 annual fee. I then transferred the credit balance to a different Amex card.

annual fee reimbursement

Final Thoughts

If you’re a Massachusetts resident and you do not plan on keeping a credit card for the next year, it may make sense to close it just before your cardmember anniversary. This way you will get 2/3 of the annual fee for the current year reimbursed. While you won’t get the whole fee back, you can enjoy the benefits of the card for an extra year at 1/3 the full price. This is particularly useful for cards like the Amex Platinum where you can get over $350 reimbursed.

5 thoughts on “An Annual Fee “Loophole” for Massachusetts Residents”

  1. Interesting find, thanks for sharing. One possible typo – I believe you mean to say, at the end, that you enjoy the extra year at “1/3 the full price”.

  2. That doesn’t jibe with how the law reads. It says “a refund on a pro-rata basis of two-thirds of the annual fee.” It seems you were instead refunded 2/3 on a non pro-rata basis. My interpretation of the intent of this law would be that if you cancel after the full refund grace period, 1/3 of the annual fee would be lost for good, and how much of the remaining 2/3 you get would be determined by how far into the cardmember year you canceled. For example, if you canceled halfway into the cardmember year, you should get half of the 2/3.
    It would seem Amex misinterpreted this law to your benefit.

    1. Wow good catch! I just skipped the legalese! I suppose much like Chase’s CARD interpretation, it could be an oversight or a deliberate move to CYA.

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