Are Credit Card Annual Fees Worth it?
When starting out, I didn’t know what to make of credit card annual fees. Mostly, I would avoid these cards and if I did open one, I would close it at or before the 1 year mark (NOT my recommended strategy).
In order to justify credit cards with annual fees, they should align with perks you will actually use. Many of the transferrable points credit cards have an annual fee around ~$100, but some get as high as $695. Full disclosure – I have not been able to justify the highest annual fee cards for myself and my family yet…maybe one day.
Perks to determine if the annual fee is worth the trouble
- The welcome offer alone can usually justify the annual fee card, even if you cash it out
- Transfer partners options
- If you plan to transfer Chase Ultimate Rewards points to an airline or hotel you cannot do it with their no annual fee cards (Chase Freedom Unlimited). You need to have a Chase Sapphire Preferred or Chase Sapphire Reserve card.
- Free checked bags with airline credit cards – will you be flying that airline this year?
- Hotel free night certificate – will your travel plans include this hotel brand?
- Travel credit when booking through their portals – sometimes hard to find a great deal..
- Travel insurance – would you buy it anyway?
- No foreign transaction fees
- Many cards now have monthly perks that if you are diligent, will more than cover your annual fee. A few examples include:
- Dashpass + $10 Doordash grocery credit with Chase Sapphire Preferred
- $50 bi-yearly Resy restaurant credit with American Express Gold Card
What are my options if the annual fees are NOT worth it?
Here is my strategy if the value is not there:
- WAIT until I have had the card for 1 year (do not close/change any personal card within 1 year of opening)
- CALL and ask to see if the annual fee can be waived or if there is a retention offer
- This actually works – I have had several fees waived over the years with my Citibank credit cards
- LOOK to see if there is a no annual fee downgrade option (Chase Sapphire Preferred card can be downgraded to a Chase Freedom Unlimited card)
- This will not affect your credit score
- You will keep the line of credit open
- If I end up deciding to close the card – I would call to see if my credit line can get shifted to a different card at that bank.
Overall, the best credit card for you is the one you can pay off every month and make use of the perks.
