I’ve paid $2,624 in annual fees on my credit cards so far in 2019. To the fee-averse consumer, that number is mind-numbing, but it’s not even the most I’ve seen among credit card rewards enthusiasts. In a recent survey I did in a travel Facebook group, I found people who spend upwards of $3,000—and even $4,000—on credit card annual fees every year, mostly on travel rewards credit cards.
But when it comes to travel credit cards, it’s not so much about the annual fee as it is about the benefits you get as a cardholder, and whether those benefits are enough to cover the yearly cost. Here’s how to make sure paying for the privilege of having a credit card is worth it.
How To Determine If an Annual Fee Is Worth It
A lot of credit cards charge annual fees, but not all of them provide enough benefits to make it worth the cost. If you’re thinking about getting a new credit card, here’s how to tell if the perks are enough.
Can You Earn Enough in Rewards Alone?
In general, I focus more on perks than rewards to determine if a card is worth its annual fee. Because, in most cases, it’s not easy to beat 2% cash back on a card with no annual fee, like the Citi Double Cash Card. However, some cards with annual fees—like the Blue Cash Preferred Card from American Express—boast enough benefits to outpace the yearly cardmember costs.
The Blue Cash Preferred card offers 6% cash back on the first $6,000 spent at U.S. supermarkets per calendar year, among other rewards rates. If you max out that bonus rate, you’ll earn $360 in cash back, almost four times the card’s $95 annual fee. Even if I only use the card on supermarket spending, the Blue Cash Preferred is worth it.
Does the Credit Card Offer an Anniversary Bonus?
A lot of travel credit cards offer some kind of bonus when you renew your account and pay the annual fee. With most of my hotel credit cards, for instance, I get a free night’s stay that’s worth more than what I pay every year to keep the card—I don’t even have to earn rewards to make it worth it.
Some other cards, such as the Southwest Rapid Rewards credit cards, offer points bonuses that don’t quite cover the cost of the fee, but help reduce the sting a bit.
Does the Credit Card Offer Statement Credits?
Some travel credit cards offer annual statement credits that reduce the effective cost of the card or neutralize it all together. For example, my Bank of America Premium Rewards credit card charges a $95 annual fee and offers a $100 annual airline incidental fee credit, which you can use to cover seat upgrades, baggage fees, in-flight services, and airline lounge fees. I maxed out this complimentary credit on a single trip earlier this year.
Another example is the Platinum Card from American Express. It charges an eye-watering $550 annual fee, but you’ll also get a $200 annual airline incidental fee credit, up to $200 in Uber credits annually (I use mine mostly for Uber Eats orders), and a $100 credit each year on Saks Fifth Avenue purchases.
Are There Qualitative Perks To Consider?
With some credit card benefits, it’s tough to attach a monetary value. For example, some airport lounge networks may charge an annual membership fee, but I wouldn’t pay it if I didn’t have a few credit cards that give me complimentary access. So, rather than trying to determine the cash value of that benefits, I think about how much better my travel experience is when I can step away from the hubbub of the airport and into a lounge.
The same goes for benefits like priority boarding and elite hotel status. There’s no guarantee that I’m going to get a room upgrade with the Hilton Diamond status I get from the Hilton Honors American Express Aspire Card. But the likelihood of earning an upgrade carries value, as does the free breakfast at every Hilton hotel.
Popular Annual Fee Credit Cards With Valuable Benefits
Whether you’re new to rewards credit cards or thinking about adding a new card to your wallet, these are a few of the most popular credit cards from Slickdeals Credit Card Hub. If travel is an important part of your life, our guide to the 10 best travel rewards credit cards is a perfect resource for people who want to earn travel rewards with their pre-budgeted spending.
Chase Sapphire Preferred
If you aren’t ready for the hefty annual fee that comes with premium cards, the Chase Sapphire Preferred may be the next best thing. The Chase Sapphire Preferred features a lower annual fee ($95) and many perks. New cardholders can earn up to $750 in travel when they spend $4,000 in their first three months. Earn 2X points on travel and dining and 1 point per dollar spent on other purchases. Points go 25% farther when redeemed on travel. Plus, this card has no foreign transaction fee, so you can use it freely on your trip to Tuscany.
- Annual Fee: $95
- Value: 2x points on travel and dining
- Sign-Up Bonus: 60,000 points after spending $4,000 during the first three billing cycles
- Pro: No blackout dates for point redemption
- Con: High spending threshold to reach sigh-up bonus
Bank of America Premium Rewards
The Bank of America Premium Rewards Visa is another great card for travelers who want to begin earning points, but aren’t ready for the steep annual fees of premium credit cards. With a $95 annual fee, the Premium Rewards Visa offers new cardholders 50,000 points when they spend $3,000 in the first three billing cycles. It also gives 2x points on travel and dining, and 1.5X points for every $1 spent on other purchases. Your points don’t expire, and you can redeem them for cash back or gift cards too.
- Annual Fee: $95
- Value: 2x points on travel and dining
- Sign-Up Bonus: 50,000 points after spending $3,000 during the first three billing cycles
- Pro: 1.5x points on general purchases
- Con: Highest rewards value limited to Bank of America Preferred Rewards members
American Express Platinum Card
The American Express Platinum makes traveling with the family a little less frazzled with annual Uber, airline and hotel credits, and access to over 1,200 Centurion Lounges for you and two guests. New cardmembers will earn 60,000 points when they spend $5,000 in their first three months. The Platinum Card comes with a hefty $550 annual fee, but it’s a favorite among many cardholders because of its generous 5x points for flights and hotels booked through American Express Travel, as well as an annual $200 airline credit to cover baggage fees and other qualified reimbursements.
- Annual Fee: $550
- Value: 5x points for flights and hotels booked through American Express Travel
- Sign-Up Bonus: 60,000 points after spending $5,000 in the first three billing cycles
- Pro: $200 annual airline credit
- Con: Only 1 point per eligible dollar spent
The Bottom Line: Is an Annual Fee Worth It?
At first glance, an annual fee may be a deal-breaker for some. The idea of paying to have a credit card in your wallet may not make a lot of sense. But depending on the card, you could get far more value out of its rewards program and perks than what you pay each year to keep it.
That’s not always the case, though, so it’s important to run a quick cost-benefit analysis to determine if a card is worth it, based on how you’d use the card. For example, I recently canceled a card because it required me to spend a certain amount each year to get an anniversary free night’s stay. The stay itself is worth more than the card’s annual fee, but I likely wouldn’t have spent enough on it to qualify.
As you consider your spending habits and travel plans, run the numbers to ensure you’re getting more than what you’re paying.
How to Compare Rewards Credit Cards
Still unsure about which type of rewards card is right for you? We get it. Choosing a credit card that meets your needs is important, which is why Slickdeals’ Credit Card Hub helps you compare the benefits of different cards, search credit cards by rewards categories, and explore cards by their issuers — all to find the best fit for your wallet.
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