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Do you think credit cards with annual fees have the best benefits? This belief is true in many cases. However, there are times when a fee-free credit card is better for you. We’ll take a look and help you answer the ageless question, “Are credit cards worth their annual fee?”
Are Credit Cards Worth Their Annual Fees?
Credit cards with an annual fee charge anywhere between $39 and up to $550. Typically, cards with the highest annual fees offer more benefits such as airport lounge access and travel credits. Cards with a low or no annual fee are more likely to only offer rewards points on purchases but minimal fringe benefits.
Most cash rewards cards only offer standard benefits like purchase protection or built-in benefits that come with any Visa or Mastercard.
Learn more about the different cards:
- Best miles credit cards (Most have an annual fee)
- Best credit cards with no annual fee
- Best cash back credit cards
When Annual Fees Are Worth It
When you’re considering a credit card with an annual fee, you must calculate when you “break even.” For example, how many purchase rewards do you need to earn or card perks do you need to use to offset the annual fee?
The best credit cards with an annual fee often offer rewards and benefits worth more than the annual fee. A prime example is a hotel credit card with a reward anniversary night, such as the IHG® Rewards Club Premier Credit Card. Use the night when the nightly rate costs more than the annual fee, and you “profit” the price difference.
Some credit cards have a free and paid version of the card.
One example is the Capital One VentureOne Rewards Credit Card ($0 annual fee) and Capital One Venture Rewards Credit Card (annual fee is $95). As you may expect, the Venture Card earns more points per purchase than the VentureOne (2x miles vs. 1.25x miles) and also reimburses your Global Entry or TSA PreCheck application fee, up to $100. You must decide if the extra benefits are worth paying $95 a year. You can learn more in our Capital One Venture vs VentureOne comparison post.
When comparing cards with annual fees, see if they offer these benefits:
- Travel fee credits
- Hotel anniversary nights (hotel credit cards)
- Free checked bags (airline credit cards)
- Point/Mile redemption bonuses for award travel
- Ability to transfer points/miles to airline and hotel partners
- Airport lounge access
- Complimentary travel insurance
The best travel credit cards are more likely to offer additional benefits than cash rewards cards with an annual fee. Cashback cards usually offer higher cashback rates than their no-annual-fee alternatives.
When Annual Fees Are Not Worth It
Paying an annual fee isn’t worth it when you fall into one of these groups:
- Won’t spend enough to earn sufficient extra rewards
- The extra card benefits (i.e., lounge access or travel credits) don’t outvalue the annual fee
- It’s a “first credit card” with no rewards program, but you want to hold long-term to build credit
It probably doesn’t make sense to get one of the best Delta Air Lines credit cards if you never fly Delta. Or, a hotel credit card may not be worth it if you don’t use the free anniversary night. When the credit card benefits expire before you use them, it’s harder to justify paying the annual fee.
Instead of paying the annual fee, you can be better off getting a free or cheaper credit card with fewer upfront benefits. Then, you pay cash for the expenses more lavish credit cards cover. If your spending habits or lifestyle changes, you can always upgrade to a more relevant credit card at that time.
If you have little or no credit, it might seem that the only credit cards you apply for charge an annual fee, usually $39 per year. While these cards are a stepping stone to better cards, you should explore similar no-annual-fee cards like the Capital One Platinum Credit Card.
The primary reason why you should choose a no-annual-fee card is that you can keep it long-term. This is a free way to improve your credit score. Even if you rarely use the card once you upgrade to a better one, keeping the account open builds credit. Keeping the account open extends your average account age and also improves your credit utilization ratio.
If you pay an annual fee but don’t use the card, you’re more likely to cancel the card. Closing the account will temporarily penalize your credit score and that account stops building credit.
Best Credit Cards with an Annual Fee
Finding a credit card with an annual fee that matches your spending and travel habits can save you money. Here are some of the cards you should consider first. Remember to weigh the potential rewards to the upfront annual fee.
The Platinum Card from American Express
Frequent flyers who visit airport lounges can benefit from The Platinum Card® from American Express. The annual fee is a whopping $550 (See Rates & Fees), but these perks can be worth significantly more:
- $200 annual airline fee credit
- Up to $200 in annual Uber credits
- Airport lounge access (includes Priority Pass, Centurion, Delta Sky Club, and Plaza Premium)
- Global Entry or TSA PreCheck application fee credit
- Hilton Honors Gold loyalty status
- Marriott Bonvoy Gold Elite status
- On-property credits at FINE Hotels and Resorts
Learn more: Is the Amex Platinum Card worth the annual fee?
Chase Sapphire Preferred Card
The Chase Sapphire Preferred® Card has a $95 annual fee. It doesn’t come with “fringe benefits” like airport lounge access, but it has flexible points redemption options:
- Travel and dining purchases earn 2x points per $1
- All non-bonus spending earns 1 point per $1
- Points are worth 1.25 cents each when redeemed for award travel on Chase
- Points are worth 1 cent each for cash and gift card rewards
- Transfer points at a 1:1 ratio to airline and hotel partners including United, Southwest, and World of Hyatt
- No foreign transaction fee
New Chase Sapphire Preferred® Card cardholders can earn 80,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening, worth $1,000 when you redeem through Chase Ultimate Rewards®. Plus, they can earn up to $50 in statement credits towards grocery store purchases within the first year of account opening.
Additional Chase Sapphire Preferred Perks
Additional Chase Sapphire Preferred benefits include unlimited deliveries with no delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with a DoorDash DashPass subscription. Activate your card by December 31, 2021.
Cardholders also earn 5x points on Lyft rides, through March 2022. Through April 30, 2021, cardholders automatically earn 2x points per $1 spent at grocery stores, up to $1,000 per month.
Plus, cardholders can earn up to $60 in statement credits on Peloton Digital and All-Access Memberships through December 31, 2021. Points are worth 25% more now through April 30, 2021, when redeemed for statement credits against existing purchases in select, rotating categories with the Chase Pay Yourself Back feature. Points are also worth 25% more when redeemed through the new Chase Dining hub in Ultimate Rewards, now through April 30, 2021.
Related: Chase Sapphire Preferred Card Review
World of Hyatt Credit Card
Select hotel credit cards, including World of Hyatt Credit Card, offer a free anniversary night. The free night is valid at any category 1-4 property. This benefit can easily be worth more than the annual fee. In this card’s case, the nightly rate must be higher than the card’s $95 annual fee. That can be easy to do.
Cardholders can earn 9 points for Hyatt stays (4 points per $1 spent at Hyatt hotels & 5 points per $1 you can earn as a World of Hyatt member). They also earn 2 points per $1 spent at restaurants, on airline tickets purchased directly from the airlines, on local transit and commuting, and on fitness club and gym memberships.
You also get automatic Discoverist loyalty status plus five qualifying night credits. You get two additional credits for every $5,000 in card purchases.
You also have the opportunity to earn up to 60,000 bonus points as a signup bonus. Earn 30,000 Bonus Points after you spend $3,000 on purchases in the first 3 months from account opening. Plus, earn 2 Bonus Points per $1 spent on purchases that earn 1 Bonus Point, up to $15,000, in the first 6 months of account opening.
Learn more: Hotel Rewards Credit Cards
It may also be worth trying for a card when there is a good limited-time credit card offer available that you know you can earn responsibly. You may be able to earn a large number of points/miles by meeting a spending requirement in a certain amount of time. This can be good if you already have a large purchase to make and it coincides with an offer that will work for you.
Credit cards worth the annual fee should be in your wallet when the rewards points and additional benefits are worth more. If not, look for a card with a lower annual fee or no annual fee. If you mostly need a card to build a credit history, consider ones with no annual fee first.
Is it worth getting a credit card with an annual fee?
Credit cards with an annual fee are worth it when the additional benefits provide more value than the fee. For example, if the annual fee is $95, the card’s unique rewards and benefits must be worth at least $95. If you’re considering a similar card with no annual fee, see how much more you must spend to offset the annual fee before you can start profiting from the more expensive card.
Cards without an annual fee are not worth it if you don’t use the various benefits as you “lose” money. Also, starter credit cards with an annual fee may not be useful if you plan on owning the card long-term but plan on applying for a better card as your credit score improves.
If you are a business owner, note that there are also business cards with and without annual fees. You can learn more in our best small business credit cards post.
Should I close a credit card with an annual fee?
It makes sense to close a credit card with an annual fee if the costs are higher than the ongoing benefits. For example, the Platinum Card with American Express has a $550 annual fee and lots of air travel benefits. But if you never fly, you can close that account and put your money to better use.
You should also consider closing a card if you no longer use it. While having an old account is useful for building a credit history, you must decide if paying an annual fee to build credit is worth it. Your credit score will most likely drop several points, but it’s one less annual fee you must pay.
What is the best credit card with an annual fee?
When you’re getting a credit card with an annual fee, you need to choose your card carefully. Pick a card that maximizes your purchase habits and benefits that match your lifestyle. While there are plenty of options, you might consider these rewards credit cards first:
- Premium travel rewards: Platinum Card from American Express
- Flexible travel rewards: Chase Sapphire Preferred
- Airline credit card: Delta SkyMiles® Gold American Express Card
- Hotel credit card: World of Hyatt Credit Card
- Dining and restaurants: Capital One® Savor® Cash Rewards Credit Card
- Grocery store purchases: Blue Cash Preferred® Card from American Express
- Small business credit card: Ink Business Preferred® Credit Card
For rates and fees of The Platinum Card® from American Express, please click here.
Chase Sapphire Preferred® Card
- Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
- Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 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, 80,000 points are worth $1,000 toward travel.
- With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
- Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.
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