Guide to Annual Fee Cards That Are Worth It
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If you’re like many Americans, you may be wondering “who on Earth would pay for a credit card?” It’s a fair question considering that applying for a card with an annual fee is not something to be taken lightly — after all, you’ll need to not only pay this fee once but will be also have pay every year (with the chance of the fee increasing over time as well). However, while annual fee cards may be intimidating, they can also hold tremendous value for those who can make the most of them.
Let’s take a look at a few popular annual fee cards and what makes them great — followed by some tips for assessing and deciding on an annual fee card of your own.
American Express Platinum Card
- Annual fee: $550
- Rewards: 5x points on airfare booked directly with the airline or via Amex Travel, 5x points on prepaid hotel bookings made through Amex Travel, 1x points on everything else.
- Other Benefits: $200 in Uber credits per year, $100 in Saks Fifth Avenue credits per year, $200 in airline incidental credits per year, Priority Pass Select, access to Centurion Lounges, access to Delta SkyClubs when flying Delta, and more.
- Current Welcome Bonus: 75,000 Membership Rewards points when you spend $5,000 in your first six months + 10x points at U.S. supermarkets stores and U.S. gas stations during your first six months of membership (up to $15,000 in combined spending).
If we’re talking about credit cards with annual fees that are worth it, let’s start with a heavy hitter: the American Express Platinum Card. While it does carry a $550 annual fee, it also packs in a ton of perks — including currently boasting an enhanced and unique welcome bonus. On that note, new cardholders can earn 75,000 Membership Rewards points when they spend $5,000 in their first six months. What’s more, for their first six months of membership, they’ll earn 10x at U.S. supermarket and 10x at U.S. gas stations (up to $15,000 in combined spending) instead of the typically 1X on each. In terms of standard rewards categories, the card earns 5x points on flights booked directly through the airline or via Amex Travel, 5x on prepaid hotel rooms booked on Amex Travel, and 1x points on everything else.
Of course, the real value of the American Express Platinum comes with the credits and perks. First, cardholders can earn $200 a year ($15 a month except $35 in December) in Uber credits, which can also be used for Uber Eats orders. Additionally, the card offers up to $200 a year in airline incidental credits, $100 per year in Saks Fifth Avenue credits, and more. It also features some impressive perks for travelers, including lounge access via Priority Pass Select, access to Delta’s SkyClubs when flying Delta, and access to Amex’s own Centurion Lounges. Cardholders can also enjoy complementary Gold status with Marriott Bonvoy and Hilton among other unique benefits.
For all of these reasons, the American Express Platinum is a go-to for frequent travelers or anyone looking for a little extra luxury.
American Express Gold Card
- Annual fee: $250
- Rewards: 4X points on dining, 4X points at U.S. supermarkets (up to $25,000 in spend per calendar year), 3X points on flights booked directly through airlines or via Amex Travel, 1X points on everything else.
- Other Benefits: $120 in dining credits ($10 a month for Grubhub, Seamless, or select restaurants), $120 in Uber Cash credits ($10 per month), and more.
- Current Welcome Bonus: Earn 60,000 Membership Rewards points when you spend $4,000 in your first six months.
While the Platinum card may be more about benefits than points, the Gold card is a rewards workhorse. That’s thanks to the 4x Membership Rewards points it offers on restaurant and U.S. supermarket purchases. Plus, the gold card currently carries its largest public welcome over offer ever — 60,000 Membership Rewards points after you spend $4,000 in your first six months.
Helping to offset the $250 annual fee is a number of credits and other perks. This includes a $10 per month ($120 per year) dining statement credit, triggered by purchases at Grubhub, Seamless, The Cheesecake Factory, Ruth’s Chris Steak House, Boxed, and participating Shake Shack locations. It also now earns $10 per month in Uber Cash, which is stackable with the credits earned from the Platinum card.
On that note, the rewards structures of the Gold and Platinum cards are quite complementary (with only the airfare and “everything else” categories overlapping). As a result, although the combined annual fee of $800 between the two cards may be steep, using the American Express Platinum and Gold cards in tandem can really fuel your travel aspirations.
Chase Sapphire Reserve
- Annual fee: $550
- Rewards: 3x points on travel purchases (after credit), 3x points on dining, 1x points on everything else — plus 10x points on Lyft rides through March 2022.
- Other Benefits: $300 annual travel credit, 50% greater value when redeeming points for travel on the Chase Ultimate Rewards portal, Priority Pass Select, and more
- Current Welcome Bonus: Earn 50,000 bonus points after you spend $4,000 in your first 3 months.
If an American Express set-up just isn’t for you, there is another major premium travel card to consider: the Chase Sapphire Reserve. Like the Platinum card, it too carries a hefty $550 annual that is offset by significant credits and features. At the top of that list is a $300 annual travel credit. After that credit is used up, you’ll then earn 3x points on all travel purchases. What’s more, when redeeming your points for travel on the Chase Ultimate Rewards portal, you’ll get 50% greater value. This means that the current 50,000 bonus points new cardholders can earn after spending $4,000 in their first three months can be worth up to $750 toward travel.
Elsewhere, the Chase Sapphire Reserve also earns 3x points for dining purchases, currently offers 10x points on Lyft rides along with a one-year complimentary Lyft Pink subscription, and features airport lounge access via Priority Pass Select. It also carries no foreign transaction fees and is a widely-accepted Visa. For all of these reasons and more, the Chase Sapphire Reserve is well worth its annual fee to those expecting to resume their travels soon.
Capital One Venture Rewards Credit Card
- Annual fee: $95
- Rewards: 2x miles on every purchase
- Other Benefits: Redeem miles to fly any airline or stay in any hotel without blackout dates
- Current Welcome Bonus: 100,000 Miles when you spend $20,000 on purchases in the first 12 months from account opening, or still earn 50,000 miles if you spend $3000 on purchases in the first 3 months
For those in need of a travel credit that lacks the bells and whistles that push them into premium territory, the Capital One Venture card may be a good option. With a modest $95 annual fee, the Venture keeps things simple, offering 2x miles on every purchase you make. Then, you can redeem those miles for travel or transfer them to more than 10 different loyalty programs.
It’s also worth noting that the Capital One Venture card is currently offering a unique welcome bonus. For a limited time, you can earn a 100,000-mile bonus when you spend $20,000 on the card in your first 12 months — or you can still earn 50,000 miles if you spend $3,000 in purchases in your first three months. These miles can then be redeemed for $1,000 in travel (or $500 if you only do the smaller welcome offer). All in all, those who are just looking for simple travel rewards and greater freedom may find both in the Venture card.
Various Airline and Hotel Cards
Finally, since everyone has their own favorite airline and hotel chain, it wouldn’t make a lot of sense to just feature a couple at random. Instead, let’s discuss some common perks among airline and hotel co-branded cards. In the case of airline cards, cardholders may enjoy such perks as free checked bags, priority boarding, or even lounge access (for higher annual fee options). As for hotel co-branded cards, they may feature complimentary status, priority check-in, and free night certificates. For these reasons, the benefits a loyal customer can get from these cards often outweigh the annual fee. What’s also nice is that they typically come in several tiers, allowing you to choose the one that makes the most sense for you.
Some co-branded cards you may consider depending on your travel preferences include:
- Delta SkyMiles Reserve Credit Card
- Southwest Rapid Rewards Priority
- Citi / AAdvantage Executive Card
- United Club Infinite Card
- Marriott Bonvoy Brilliant
- Hilton Honors American Express Aspire Card
- IHG Rewards Club Premier Credit Card
- Wyndham Rewards Earner Plus Card
Tips for Deciding if an Annual Fee Card is Right For You
Make sure you can afford it
Something important to note is that, in most cases, your first annual fee will be paid with your first card statement. In other words, you’ll need to shoulder that expense before you can get the benefits from the card. While it’s easy to say that getting $1,000 in value out of a card that only costs $500 is a no-brainer, the truth is that, if you can’t afford that $500 upfront, then it’s still not a good option for you. Therefore, similar to how you should ensure you can meet the minimum spending requirement for sign-up bonuses, it’s also in your best interest to honestly consider whether or not you can afford an annual fee.
Do the math
Once you’ve determined that you can indeed afford an annual fee, it’s then time to calculate your expected value. For example, cards such as the American Express Platinum card feature various credits that can go a long way toward offsetting the annual fee. Unfortunately, if you forget to tap these credits or don’t use them to their full potential, then your math might look a bit different. Meanwhile, other perks such as airport lounge access may be harder to quantify in numbers. Therefore, your figures may be subjective but are still worth thinking about.
It’s also a good idea to think about your card in terms of first year value and then subsequent year value. That’s because, thanks to the sizeable sign-up bonuses that many premium cards boast, you’re likely to see far greater benefit during your first year as a cardholder than in years two, three, etc. If a card makes sense for you in the first year but falls in value after that, you’ll want to think hard about whether or not it’s really a good fit overall (although, as you’ll see, you may have other options if this is the case).
Pay attention to redemption values
When talking about credit card points, miles, and cashback, it can be easy to assume that everything is an apples-to-apples comparison. In reality, card currencies can not only differ from each other but the value you get for your points can also vary greatly depending on what you redeem them for. A great example of this is American Express Membership Rewards points. Although you can use your points for statement credits, this option typically only values each point at 0.6¢. On the other hand, transferring your Membership Rewards points to partner airlines and redeeming for premium products may result in each point being worth 2¢ or more. Elsewhere, Chase Ultimate Rewards may be worth 1.5¢ per point when redeemed for travel with the Sapphire Reserve but 1¢ each if taken for statement credits.
The bottom line is that you always do your research on the card currency you’re considering. Then, consider these potential redemption values when calculating your expected return for a given card.
Consider downgrade paths
Finally, as I mentioned, there may come a time when a card no longer makes sense for you. Luckily, while you might assume you’d just need to cancel your card entirely, there may be a better option. In some cases, card issuers may be able to downgrade your card to one with a lower annual fee — or, ideally, one with no annual fee. That way, you won’t be burdened with the high annual fee but will also keep your account active, which may be beneficial to your credit score. If you’re interested in learning more about your options, it never hurts to call your card issuer and see what’s available to you.
Ultimately, in the hand of the right cardholders, annual fee cards can be worth their cost and then some. Of course, the trick is to find one that makes the most sense for your travel habits, spending, and needs. In fact, it’s always a good idea to run the numbers and ensure that you’ll get positive expected value from the card during your first year and well beyond. If so, then these cards can be well-worth their sometimes sizable annual fees.
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Also published on Medium.