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Premium travel credit cards like the Chase Sapphire Reserve® and Platinum Card® from American Express have plenty of travel perks. These highly sought after cards command a high annual fee of $550, as a result (See Rates & Fees for the Amex Platinum). But many frequent travelers are wondering if paying annual fees on premium credit cards is still worth it.
Is Paying Annual Fees On Credit Cards During the Coronavirus Pandemic Worth It?
The answer isn’t an easy yes or no as there are many variables with the current pandemic. We know the domestic travel restrictions and international travel restrictions will end as the health situation improves. However, we don’t know when the threat of COVID-19 will dissipate and the travel industry can establish a new level of normalcy.
Why Do Banks Charge Annual Fees?
Many of us are familiar with the mantra, “You get what you pay for.” In travel, a first-class airline ticket costs more than flying coach. Both tickets get you to the destination, but the premium cabin is more luxurious. Having the extra amenities, lie-flat seats, and personal service can be worth the higher cost on a long flight.
The same principle applies when comparing consumer travel credit cards and premium travel credit cards. The cheaper travel credit cards earn rewards points on purchases to book future award travel. However, premium credit cards offer swanky benefits, usually including some of the following:
- Travel fee credits
- Airport lounge access
- Complimentary hotel nights or on-site amenity savings
- Enhanced hotel loyalty membership states
- Robust travel insurance benefits
- Global Entry or TSA PreCheck application fee credit reimbursement
- Complimentary Boingo WiFi
Banks are able to offer these lavish benefits by charging an annual fee between $450 or $550. While this annual fee is eye-popping at first glance, regularly using the benefits means your annual savings are more than you spend.
Standard travel no annual fee credit cards or those with a fee of $100 or less have relatively few benefits. Your annual fee may be lower, but your potential benefit value is also lower.
If you only travel once or twice a year, a cheaper card is usually the better option. But if you travel often or make at least one epic trip per year, the premium benefits can save you more money in the long run.
For instance, flexible rewards cards with a $95 annual fee may have travel insurance (like the Chase Sapphire Preferred®) and Global Entry or TSA PreCheck credit (like the Capital One® Venture® Rewards Credit Card).
Branded airline and hotel credit cards offer loyalty program perks like free checked bags or a complimentary hotel night certificate.
Here are some examples of the two leading premium credit cards.
Platinum Card From American Express
- $200 airline fee credit
- Airport lounge access (Centurion, Priority Pass, Delta Sky Club, Escape, and others)
- Global Entry or TSA PreCheck application fee credit
- Fine Hotel & Resorts complimentary benefits (average value of $550)
- Hilton Honors Gold status
- Marriott Bonvoy Gold Elite status
- Car rental privileges
- Secondary rental car insurance
- 1:1 point transfers to airline and hotel partners
The Platinum Card from American Express also earns 5 Membership Rewards per $1 on flights you book directly from airlines or on AmexTravel.com. Prepaid hotel nights on AmexTravel also earn 5x points. Most standard consumer travel credit cards earn 2 points or less on travel purchases.
This card is a good fit if you utilize airport lounges plus the hotel and rental car benefits.
The Amex Platinum’s annual fee is $550 for the primary card (See Rates & Fees). Your first three additional Platinum cards for secondary users costs $175 then $175 each for the 4th card and above. American Express® Gold Cards are free for each authorized user.
Some American Express credit cards have bonus categories in response to the pandemic. It’s possible to earn up to $40 in monthly statement credits for streaming and wireless phone subscriptions for the rest of 2020.
Chase Sapphire Reserve
The Chase Sapphire Reserve® offers a variety of travel and dining benefits:
- $300 travel credit
- Priority Pass Select lounge access
- Global Entry or TSA PreCheck fee credit
- Luxury Hotel and Resort Collection special benefits
- Trip cancellation and interruption insurance, up to $10,000 per person ($20,000 per trip)
- Primary rental car collision and theft coverages (on most car rentals)
- $120 in DoorDash statement credits ($60 in 2020 and $60 in 2021)
- DoorDash DashPass membership for up to one year
- Lyft Pink membership for up to one year
- 1:1 point transfers to airlines and hotels
- 50% point redemption bonus when booking travel through the Chase travel portal
You earn 3 Ultimate Rewards per $1 on dining purchases and 3x points on travel (immediately after earning the $300 travel credit). Cardholders earn 1x points on all other non-bonus spending.
Chase is offering special Sapphire coronavirus benefits that add more value to local purchases during this time when we aren’t traveling often, if at all. For instance, Chase automatically applies the $300 travel credit to grocery store and gas station purchases from June 1, 2020, to December 31, 2020.
The Chase Pay Yourself Back tool makes your Ultimate Rewards worth 1.5 cents each when redeemed as a statement credit for grocery, dining, and home improvement purchases through September 30, 2020.
Your Ultimate Rewards and Chase Sapphire Reserve can still be more valuable when transferring to airlines and redeeming. But, you may need to wait until more flights are available. Until then, the coronavirus benefits still make it easier to offset the $550 annual fee.
The annual fee is $550 for the primary card and $75 per additional user.
When to Keep Your Premium Credit Card
Is it worth paying annual fees on premium credit cards? Keeping your premium credit card is worth it in these instances:
- You anticipate traveling more often in 2021
- The modified coronavirus benefits offset the annual fee
- You use the “premium” retail and dining benefits regularly
If the travel shutdown prolongs deep into 2021, we may see banks offer more “retention perks.”
Downgrade Instead of Canceling
No longer getting enough value from a premium card doesn’t mean your only alternative is closing your account. In fact, account closures should be your last option as you can lose an important part of your credit history.
An exception to the rule is if you opened the account in the last year or two as your credit age is low.
You may also decide to cancel if you can qualify for a signup bonus on a cheaper card soon.
Downgrading can be the better option as you keep your account history but pay a lower fee. You can also avoid a hard credit check (here are some of the best places to get a free credit score check). However, you forfeit the premium purchase rewards categories and add-on benefits.
Most banks will let you downgrade to a lower-cost credit that earns the same credit card currency. For example, the Chase Sapphire Reserve can downgrade to the Chase Sapphire Preferred ($95 per year). The $0 annual fee Chase Freedom® and Chase Freedom Unlimited® are possibilities too.
With the Platinum Card from Express, consider the American Express Gold Card instead as its annual fee is $250 (See Rates & Fees). You might also be able to downgrade to the Amex EveryDay® Preferred Credit Card ($95 per year – See Rates & Fees) the Amex EveryDay® Credit Card ($0 annual fee – See Rates & Fees) as well to keep earning Membership Rewards.
If you have a premium airline or hotel credit card, you can request a downgrade to the consumer or no annual fee version.
So, Is Paying Annual Fees on Premium Credit Cards Worth It Right Now?
An extended travel shutdown can be a valid reason to discontinue paying annual fees for premium credit cards. Downgrading to the standard consumer version saves you money but still lets you maximize your travel potential when you travel more sporadically. Hopefully, the travel restrictions end sooner instead of later so premium travel cards are still the best option for frequent travelers.
Can I cancel a credit card before I pay an annual fee?
It’s possible to cancel your credit card before you pay an annual fee. You will need to cancel before your card opening anniversary date. Your credit card statement should state when the bank will charge your annual fee. To avoid a potential fee, you should cancel your card at the last statement closing period before your card anniversary date.
Make sure you use any remaining credits and travel benefits before canceling. You forfeit any remaining benefit value once the bank closes your account.
One exception to this cancellation suggestion is for a new credit card. Most banks require you to keep your credit card account open for at least 12 months. Canceling before your first anniversary means you might have to repay the signup bonus you earn. The bank may also close other cards you have with them as well, without your consent.
Before applying for a new card, plan on keeping the card for at least one year. After the first anniversary, use what benefits you can for that second year, such as hotel night certificates. After exhausting these card renewal perks, pay off your balance, and close the account or request a downgrade to a credit card with no annual fee.
Will I get charged if I don’t use my credit card?
Credit cards don’t charge an inactivity fee, but you pay the same annual fee whether you use the card for one purchase per year or daily. Closing or downgrading an expensive credit card is a wise move when the cost of paying annual fees exceeds the value you get in rewards points and additional benefits.
In addition to saving money, prolonged account inactivity can lead to a credit limit reduction. This practice applies to cards with and without annual fees. Less available credit can hurt your credit score. Banks are initiating credit line decreases more often during the pandemic to prevent credit card fraud and credit card defaults.
Should you close credit cards you don’t use?
It’s not a wise move to close credit cards you rarely use if they are some of your oldest accounts. These account closures can harm several credit score factors including your average account age and payment history. If this card has an annual fee, see if the bank will downgrade your account to a no annual fee credit card.
Closing accounts that are only a few years old or younger will have a lower negative effect on your credit score. You may consider downgrading these accounts as well to continue building credit.
One reason you might close an account is to get a potentially larger credit line at another bank. Each bank has its own formula for determining your credit limit on each card you open. However, your credit limit for subsequent cards might be less than your first cards if your credit score and annual income don’t improve drastically.
Another reason to close an account is if you have too many cards with one bank. Most banks let you have up to 5 open credit cards with them at one time. If you can’t switch an existing account to a different credit product, closing an account may be your only option to apply for a new credit card and get approval.
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For rates and fees of The Platinum Card® from American Express, please click here.
To learn more about the rates and fees of The American Express® Gold Card, please click here.
For rates and fees of The Amex EveryDay® Preferred Credit Card, please click here.
And for rates and fees of The Amex EveryDay® Credit Card, please click here.
Chase Sapphire Preferred® Card
- Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Earn 5X points on Lyft rides through March 2022. That’s 3X points in addition to the 2X points you already earn on travel.
The comments on this page are not provided, reviewed, or otherwise approved by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered. Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airlines or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities.
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airlines or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities.