I Used to Hate Annual-Fee Credit Cards — Here’s Why I Was Wrong

Now that I've had a change of heart, I've earned thousands of dollars in free travel.

Many people learn about the importance of their credit after making mistakes and rebuilding. My story is different. I was 20 years old when I started working in the credit intervention department at a local mortgage company. My job involved helping people who didn’t qualify for a mortgage learn how to improve their credit situations.

By showing people how to bounce back from credit problems, I quickly learned just how influential credit reports and scores were over our financial lives. I was scared straight, so to speak, before I ever had a chance to make any big credit mistakes of my own.

As someone who learned early how to earn good credit, I had a strong opinion about credit cards with annual fees. I didn’t feel like I needed to waste money on annual fees when I had excellent credit and could qualify for credit cards without them. It turns out, I was looking at things all wrong.

Why I Didn’t Like Annual Fees

For years, I avoided annual-fee credit cards altogether. I did not, however, avoid credit cards themselves.

I understood that:

  • Well-managed credit cards can potentially help you earn good credit scores.
  • Credit cards offer better fraud protections than cash or debit cards.
  • I like free stuff and credit cards gave me the chance to earn rewards and cash back.

Yet even though I liked earning valuable credit card rewards, I worried that annual fees were a potential waste of money. Sure, certain credit cards gave you the chance to earn more value in rewards than the cost of their fees, but it felt like a lot to keep up with. I thought I was too busy to manage the process correctly. And I didn’t want to keep track of points to ensure I was getting enough value from the card. In hindsight, my misguided opinion cheated me out of some pretty great opportunities over the years.

A Change of Heart

Eventually, I met other credit and financial experts who had very different opinions than me when it came to credit cards with annual fees. These weren’t out-of-control credit card churners, but people I respected who took advantage of lucrative credit cards rewards, like free vacations, while still maintaining great credit.

Eventually, my husband and I decided to open a credit card with an annual fee — the Southwest Rapid Rewards Priority Card. Actually, we opened two annual-fee credit cards (one in each of our names).

The $149 annual fees for each card were well worth the value we got in exchange. Shortly after opening the accounts, we each met the $4,000 spending requirement (courtesy of an HVAC unit that needed to be replaced in our home) and earned our sign-up bonuses*:

  • 30,000 Southwest Rapid Rewards Points Each
  • Free Companion Pass (Per Card) for the Remainder of 2019

*The current sign-up bonus for this card is worth up to 60,000 Southwest Rapid Reward Points.

We then used our sign-up bonuses to score four almost-free roundtrip flights from Charlotte to Houston, where we caught a cruise out of the Port of Galveston. The four flights would have cost more than $1,700, but we only paid around $10 each for taxes.

In the end, we swapped out $298 in annual fees for a little over $1,700 in flights. That’s an extra $1,402 in value, and a pretty great deal in my book.

By comparison, if I’d paid for our $8,000 HVAC unit replacement with my 2% cash back rewards card, I would have only gotten $160 cash back. My previous no-annual-fee philosophy would have cheated me out of an extra $1,242 in value.

Some of My Favorite Credit Cards with Annual Fees

Our two Southwest Rapid Rewards Priority Cards were just the beginning. Now that I’ve embraced the rewards I can earn on credit cards with annual fees, I have a few new cards in my wallet. Here are my favorites:

Chase Sapphire Reserve

Chase Sapphire Reserve is one of my favorite credit cards, despite its $450 annual fee. The current sign-up bonus of 50,000 Chase Ultimate Rewards (after spending $4,000 on purchases in the first three months of opening) is solid, especially when you consider that these points are worth 50% more if you use them on Ultimate Rewards redemptions.

Besides the sign-up bonus, the Chase Sapphire Reserve has other benefits, too. It offers a $300 annual travel credit and the ability to earn 3X points on travel and dining purchases.

American Express Platinum

To be honest, I found the $550 annual fee for the American Express Platinum Card a little concerning at first. But I’ve since gotten a ton of value out of the card. Ultimately, I’m happy to have it in my wallet.

I was fortunate enough to earn a sign-up bonus worth 100,000 Membership Rewards points. (The current sign-up bonus is worth 60,000 Membership Rewards points after you spend $5,000 in purchases in the first three months.)

The Platinum Card also comes with a $200 annual airline fee credit, up to $200 in yearly Uber credits, and $100 in yearly statement credits from Saks Fifth Avenue. You can also earn 5X Membership Reward points on flights booked directly with airlines and prepaid hotels booked on amextravel.com.

Start Small

If you’re nervous about credit cards with annual fees, remember that you don’t have to start with one of the large-fee cards. Pick one with a low annual fee that earns better rewards in an area where you have higher spending levels (e.g. travel, dining, gas stations, etc.). Then see how much value you get in exchange.

Regardless of which type of credit card you choose (annual fee or fee-free), be sure to pay off your full statement balance each month. This will both save you money and protect your credit scores from potential damage. After all, money saved and good credit are the best rewards of all.

Not convinced that these cards are right for you? Understandable. 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.

Earn More Points Today

 


We want to make sure you get the best deal! Our editors strive to ensure that the information in this article is accurate as of the date published, but please keep in mind that offers can change. We encourage you to verify all terms and conditions of any financial product before you apply. Also, please remember this content wasn’t provided, reviewed or endorsed by any company mentioned in this article.

Image credit: iStock.com/PeopleImages

Michelle Black

Michelle Black is founder of CreditWriter.com and HerCreditMatters.com. Michelle is a leading credit card journalist with over a decade and a half of experience in the financial industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting, small business, and debt eradication. Michelle is also a certified credit expert witness and personal finance writer.

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