This past summer several of the travel credit cards revamped their programs and increased the annual fees for their premium cards. How do you know if the annual fees are worth it or not? Hopefully this short guide will help you decide.
1. If you can’t pay your card balance off every month then it is not for you. Period. End of story. Travel cards have huge interest rates, and you will pay far more in interest than you gain in benefits.
2. Ensure you can spend enough to meet the minimum requirements for the welcome bonus. Almost all travel credit cards require a minimum spend within a certain amount of time in order to qualify for the welcome bonus. This might be a single purchase or it might be $4000 in three months. Have a good idea of what your normal credit card spend is per month – groceries, gas, regular appointments. Then look forward and see what else you can reasonably put on the card – do you have a trip coming up, car maintenance, house maintenance, an out-of-pocket medical appointment etc… Never spend money just to meet the minimum spend!
If the welcome bonus is enough to make the annual fee worth it, you can stop here. For me, a small annual fee of $99 or even $150 to get 80,000-100,000 points is worth it and I don’t worry too much about the other benefits of the card. This is essentially buying points on sale that can be used later for double or triple the value. However, this is not true for the higher annual fees.
3. Analyze your estimated benefits of the card. The credit card company will advertise how much “value” your card will give you. This includes a slew of discounts and credits. Some are easier to use than others. Many provide reimbursement for TSA or Global Entry. Several also provide airport lounge access. Not all benefits are valuable to all people and not all benefits should be estimated at face value. Let me give you some examples.
I have many friends that have the American Express Platinum card. And it gives them great value. But I have never made the leap because my life style is not conducive to many of the benefits. The card has a significant Walmart credit which is great for most Americans. But I don’t live in a suburb and I’m not near a Walmart and I prefer to do my own grocery shopping. The card also provides a great Sacks credit but I don’t do a lot of online shopping and don’t want to go looking for things to buy. Both are very valuable credits — but just not for me. So, when I estimate the value of the benefits I would use, the math comes up short.
On the other hand, there many card benefits that I will use but may value them less. Ride Share credits are a popular feature for many cards. I use them frequently and always give them full value. However, my husband uses them significantly less. When estimating the value for him, I usually assume he will only use about half of the credits. Or a card might give free access to a streaming service, but if that is not a service I already pay for, I won’t consider the face value when considering if the annual fee is worth it or not.
These calculations will be different for everyone but before applying for a card with a high annual fee, make sure you understand the benefits and what they are truly worth to you.
4. Reevaluate Annually. A card’s value to you will change over time. Especially after the first year when you will no longer get a welcome bonus. I keep a detailed spreadsheet where I record the actual value gained from a card. For that streaming service, my husband and I watched a show every night for three months, so I valued it at the monthly fee for 3 months, not 12 months. If I use an airport lounge, I will value each visit at $5-$10, about what I would have spent for a drink and snack in the airport. If I have early boarding, I will value the reduced stress at $5-$10 but if I need to check a bag, I will value that at the actual cost. Some cards offer a credit for flights or hotels booked through the portal. When I use it, I will always check other sites to compare prices. This year, I valued the Chase $50 credit at $41 because the portal price was $9 more than I found it elsewhere. It was still a great deal because I got $41 “free” but it wasn’t worth $50. This constant analysis provides objective data to let me know when I should or should keep a card for another year.
I hope this short post helps give you a framework when a card might be worth it and when it is not!
Life Kinetic Travel Research 