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Is Credit Card Annual Fee Worth It

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Ongoing Memberships And Benefits

Credit Card Annual Fee: When It’s Worth It (EXPLAINED)

Many cards set themselves apart by offering ongoing perks simply for being a cardholder. This is particularly prevalent with travel credit cards. Mid-tier airline cards, usually costing around $95 per year, may offer perks like priority boarding and free checked bags. Hotel cards typically extend elite status in their frequent-stay program, providing benefits including room upgrades or late checkout. Someone traveling just once or twice a year could break even with their annual fee.

Premium cards, costing between $400 and 550 per year, offer those perks and more. Common benefits may include hotel and rental car chain elite status, airport lounge access, travel insurance, or discounts on travel booked through the cards own travel agency. Frequent travelers who use these benefits can get more than their moneys worth, despite the higher fee.

Card benefits arent limited to travel, though. For example, The Platinum Card® from American Express , offers up to $200 annually in Uber Cash for eligible U.S. purchases when you add your card to your Uber account and up to $100 to Saks Fifth Avenue . If youre likely to use all these offers, the annual fee offers strong value.

Alternatives To The Amex Platinum

Whether you’re a current Amex Platinum cardholder, or are considering applying for it, it is advantageous to consider all options available. It could be another American Express credit card, a business credit card if you are a business owner or a comparable travel credit card that may be a better option for you.

If you want similar travel perks to the Amex Platinum, consider The Business Platinum Card® from American Express. It comes with airport lounge access, hotel elite status and travel credits like the personal Platinum card, but has a slightly lower annual fee of $595 . The fee is going up to $695 if your application is received on or after 01/13/2022.

The Chase Sapphire Reserve® is another premium travel card loaded with benefits, including a $300 travel credit, Priority Pass airport lounge membership, plus it earns 3X points on all travel and dining purchases. However, it does have a $550 annual fee.

For those who don’t want to fork over north of $500 for an annual fee, consider the Chase Sapphire Preferred® Card and American Express® Gold Card. The Sapphire Preferred currently has a 60,000-point welcome bonus which you’ll earn after spending $4,000 in the first three months of card membership. Those points are worth $750 for travel when booking through Chase and the card carries an annual fee of only $95.

Getting Value From Travel Perks

A collection of can justify a cards annual fee even before factoring in any savings from point or mile redemptions. Sometimes, these benefits have clear, specific values that can immediately make up for some of the cost of an annual fee. But others are only valuable depending on whether you intend to use them.

For instance, the Alaska Airlines Visa Signature® credit card offers cardholders an annual companion fare for direct Alaska bookings, starting at $121 . If you ever buy Alaska tickets with a family member or friend, the discount from that ticket could save you much more than the cards $75 annual fee.

Up to $29

*See the online provider’s credit card application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all credit card information is presented without warranty. When you click on the “Apply Now” button, you can review the credit card terms and conditions on the provider’s website.

Other travelers might prefer perks that dont necessarily appeal to all potential cardholders. The ultra-premium Platinum Card® from American Express is known for its complimentary airport lounge memberships, but not everyone likes to visit a lounge at the airport. For those travelers, the cards other perks and rewards might not justify its eye-popping $695 annual fee.

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What Do You Care About More: Comfort Or Value

Deciding whether a card is worth its annual fee also comes down to what you value and what youre willing to spend money on. If you value luxury and comfort, for example, then you may be happier with a card such as The Platinum Card® from American Express, which offers plusher service and experiences for a $695 annual fee.

But if youre eager to build a big collection of rewards, you may find the Platinum card disappointing. It only offers bonus points on flights and prepaid hotels booked with Amex Travel or directly with the airlines.

On the other hand, the Platinums sister card, the American Express Gold, doesnt come with as many high-end perks but can offer great value with generous statement credits and rewards in lucrative categories.

I recently got it couldnt say no to the beautiful rose gold design option and I already know Ill be keeping it for a long time. The card comes with up to $120 in Uber Cash credits annually for U.S. Eats orders and rides and up to $120 in dining credits annually for eligible restaurants, Seamless, Grubhub or Boxed . Its now the highlight of the first week of each month for me, as I use these monthly credits as soon as they become available.

The card also offers 4 points per dollar on restaurant purchases and 4 points per dollar at U.S. supermarkets , so I can quickly earn rewards on my normal spending to later use for travel. Do you see now why I love this card despite its $250 annual fee?

Do All Credit Cards Have Annual Fees

When Is a Credit Card Annual Fee Worth It? Rewards vs ...

No, all credit cards don’t have annual fees, so if you don’t want to pay an annual fee, you can definitely find a .

That said, don’t write off a credit card with an annual fee. There’s generally a very good reason for an annual fee, and, in fact, many cardholders actually seek out credit cards with annual fees, crazy as that may sound to somebody who doesn’t think a lot about credit cards. An annual fee is often a sign that you’ve found a credit card with a lot of perks, rewards and amenities.

It’s, of course, wonderful when you can find a really good credit card that has a robust rewards program and no annual fee, but a credit card with an annual fee is usually a signal that you’re dealing with an excellent credit card that you should pay some attention to. Even better, many times, those annual fees are waived for the first year, bringing you even more savings.

In other words, the best credit cards often have annual fees. A good rule of thumb – the more you pay for an annual fee, the more you can potentially save and receive in rewards and perks. It really all comes down to a person’s spending habits and expectations. If you get a credit card with a high annual fee, but you rarely use the credit card, and you don’t take advantage of the rewards, then obviously it’s not a good credit card – for you. For somebody else, it may be a fantastic credit card.

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Changes To Your Credit Card Annual Fee

If your credit card issuer decides to impose a new annual fee or raise the current one, they’re required by federal law to notify you 45 days before the new annual fee becomes effective. You have the option to reject the new annual fee.

If you decide to reject the fee, you will have to close your credit card account. If that happens, you may want to look into opening a no-fee card in order to avoid lowering your credit score.

Best Credit Card With No Foreign Transaction Fees

Why We Like It:

The Bonus: Earn 60,000 Chase Ultimate Rewards® points after spending $4,000 in the first three months. That’s worth $750 in travel.

The Rewards: Earn five points per $1 on travel purchased through Ultimate Rewards® three points per $1 on dining, select streaming services and online grocery store purchases two points for every $1 spent on travel expenses and one point for every $1 spent on all other purchases. Plus earn five points on Lyft rides through March 2022. That’s three points in addition to the two points you already earn on travel.

The Annual Fee:$95

How do you Offset the Annual Fee? The welcome bonus easily covers the annual fee, but even if you don’t achieve the bonus, you can easily cover the annual fee if you are someone who travels or dines out often. For example, spending $6,000 a year on dining out and travel would net you 12,000 points. That alone would be worth $150 when redeemed for travel through the Chase Ultimate Rewards® program.

Excellent, Good

PROS:

  • We really like the travel perks, such as no foreign transaction fees and trip cancellation and interruption insurance.
  • It isn’t just that there are high reward rates, but there are no blackout dates, restrictions or expiration dates on rewards.
  • The points earned with this card are worth 25% more when redeemed for travel through the Chase Ultimate Rewards® travel portal, meaning the bonus alone is worth $750 in travel.

CONS:

Likelihood of Continuing to Use8.2

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Best Credit Card For Point Redemption Value

Why We Like It:

The Bonus: Earn 50,000 bonus points after you spend $4,000 on purchases in the first three months from account opening, worth $750 toward travel when you redeem through Chase Ultimate Rewards®.

The Rewards: Earn 5X total points on air travel and 10X total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards immediately after the first $300 is spent on travel purchases annually. Earn 3X points on other travel and dining and 1X point per dollar spent on all other purchases.

The Annual Fee: $550

How do you Offset the Annual Fee? The $300 travel credit this card offers, access to 1,300+ airport lounges worldwide after an easy, one-time enrollement in Priority Pass Select, up to a $100 application fee credit for Global Entry or TSA PreCheck®, and one year complimentary Lyft Pink access more than offset the annual fee with ease. And that’s not even taking the welcome bonus or 50% more value on points into consideration.

Excellent

PROS:

CONS:

  • Of course, the annual fee. This card is designed with travelers in mind, so if you don’t travel enough to use the numerous perks this card offers, you may have trouble offsetting its cost.
  • There is a $75 fee for authorized users, so if you plan to add additional users to your account, this is something to keep in mind.
Likelihood of Continuing to Use8.6

*Scores above reflect the results of surveys with actual cardholders. Full methodology below.

Why Do Credit Card Issuers Charge Annual Fees

Credit Card Annual Fees | Understanding the Value & Why It’s Sometimes Worth Paying

Companies may charge an annual fee for certain cards that provide generous cardholder benefits, like travel credits, exclusive rewards opportunities or free checked luggage on flights. You generally pay more per year for the cards that come with the most perks. Another time a credit card may have an annual fee is if it’s geared to borrowers with fair or poor credit. Interest rates for these types of cards may also be high. The good news is that after building credit with the card you may be able to qualify for a card that has a lower fee and a better interest rate.

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Can Credit Cards With Annual Fees Be Avoided

There are definitely cards you can apply for that simply donât charge an annual fee.

If you currently have a card that charges an annual fee, you might consider asking your card issuer if they can switch you to one that doesnât. Just keep in mind that may not mean getting a refund for an annual fee youâve already paid.

If all else fails and youâre not comfortable paying an annual fee the next year, you could even cancel the card. However, keep in mind this could affect your credit score. Thatâs because once you lose access to the cardâs credit limit, your could go up. This ratio reflects the amount of credit you have available compared with the amount of credit youâre using. And itâs an important part of your credit score.

Canceling a card can also impact the average age of your open accounts and the types of credit you have. And both of those can have an impact on your credit score.

Will You Use Your Card For Everything

Once you know the fee, its just a matter of math. You need to estimate how much youll charge to the card. For cash back cards, its easy to calculate the value of your rewards. For travel cards, it can get a bit more complicated .

In addition to the rewards, you should also factor in other perks. For example, the Chase Sapphire Reserve? offers a $300 annual travel credit. This credit covers more than half of the cards $450 annual fee. Another common perk with airline cards is free checked luggage.

Once you know the value of the rewards, its time to do the math. Assuming a cards rewards are worth 2%, youll need to spend $2,500 on the card for every $50 in fees to break even. And this doesnt include extra perks as described above.

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No Annual Fee Credit Cards Faq

Comparing no annual fee credit cards can be tough. But youve got the knowledgeable WalletHub community on your side. We encourage everyone to share their knowledge while respecting our content guidelines. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not the financial institutions responsibility to ensure all posts and questions are answered….show moreshow less

When Card Cards With No Annual Fee Are Best

Is that credit card with the annual fee really worth it ...

Bear in mind that most cards that charge an annual fee are rewards credit cards, and they aren’t right for everyone. Those who tend to carry a balance should focus on paying off their debt and use a card with the lowest possible interest rate. Since reward credit cards have higher interest rates than similar cards that don’t offer rewards, a rewards card will be poor choice when you have to pay interest.

People with modest spending habits will often be better off using a card without an annual fee too. For example, if you only spend $150 a month at grocery stores, then you might not receive enough additional cash back to justify paying $95 a year for the Blue Cash Preferred instead of using the no-fee Blue Cash Everyday card.

Finally, there’s always been room in my wallet for great cards that just happen not to have an annual fee. Currently, this include both the Chase Freedom Unlimited and the The Blue Business® Plus Credit Card from American Express.

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Is The Annual Fee Worth It On A Credit Card

I’ve been studying and writing about credit cards since 2008, and I currently hold 17 active accounts, split roughly evenly between those with and without an annual fee. Allow me to settle this question once and for all.

There’s no denying that many credit cards have annual fees that can be well worth paying. But whether the fee is worth it or not totally depends on your circumstances and spending habits.

When you can receive additional rewards and benefits with value that exceeds the cost of the annual fee, then you’re be better off paying the annual fee. That’s not to say that everyone should have a credit card with an annual fee, however. Let’s look at one simple example to demonstrate when a card’s annual fee is worth it.

True Or False The Annual Fee Pays For Itself

The short answer: it depends on your spending habits.

If you use your credit card for most purchases, leverage card perks, and pay off your balance in full every month, you can earn more than enough rewards to offset the cost of the annual fee. That said, if you donât spend much on your credit card, a no fee card could make more financial sense.

For a simplified comparison, letâs do the math and view two flat-rate rewards cards side-by-side under different spending scenarios to identify when paying an annual fee card makes sense.

Avg. Monthly Spending
$381$300

As you can see from the table above, $1,100 per month represents the tipping point when carrying the $99 annual fee SimplyCash Preferred card starts delivering far more value.

Of course, this is a simplified example comparing two cards from the same issuer and doesnât factor for the added value of perks like emergency travel insurance, flight delay insurance, and CDW rental car insurance â which is lacking on the no fee Amex SimplyCash.

You can use Ratehubâs to compare multiple cards from different banks to see which earns you the most rewards based on your personal spending habits.

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Compare Cards Before Applying

Whether paying an annual fee for a card makes sense for your budget depends on your spending habits and the benefits the card provides. If you rarely travel and barely use a credit card, choosing one with an annual fee may not be worthwhile since you may not see enough benefit to justify the fee. On the other hand, if you spend heavily in a certain shopping category and a credit card rewards you for it, paying an annual fee for premium perks and rewards opportunities could work out well for you. Before choosing a card, it’s always a good idea to compare rewards programs to land on the right card for your situation. If you’re looking for a good place to start shopping around, you can get personalized credit card offers that won’t affect your credit score using Experian CreditMatch.

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