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Is Getting a Credit Card With an Annual Fee Worth It?

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There’s a difference between knowing the price of something and knowing the value of something. This is never truer than when it comes to credit cards that charge annual fees. Annual fees for most paid cards range between $59 and $125. Of course, some annual fees are much higher. The Centurion Card from American Express has an annual fee of $2,500.

Does a high fee always translate to a high value when it comes to today’s popular credit cards? It’s easy to assume that elite cards open elite doors. However, you really have to do your homework before you put down what effectively works out to be a down payment on a credit card. Are you wondering if an annual fee is worth it? Some people say that you should never pay for the privilege of using a credit card. However, it’s probably wise to never say never when it comes to paid cards that offer impressive perks for paying cardholders. Take a look at the five questions to ask before signing up for a credit card that charges an annual fee.

Do No-Fee Cards Offer Comparable Benefits?

A card with a fee isn’t necessarily the best game in town. Make sure you explore what’s available for free before you pay for a card. Of course, it can be hard to round up all of the paid and non-paid card options out there to do a comprehensive comparison. A good way to start is by at least comparing all of your paid options to a card like the Capital One VentureOne Rewards credit card. This card is considered to be one of the most robust no-fee credit cards in the industry when it comes to perks. A paid card that doesn’t at least put more on the table than the VentureOne card when all the numbers are crunched probably isn’t worth your while.

Does It Cover Important Travel Expenses?

Plenty of credit cards that charge fees will have you breaking even or coming out ahead. Any card that offers things like travel insurance, price protection and extended warranties is probably going to have you coming out ahead if you tend to travel often and make large purchases. In fact, paying a few hundred dollars for a card that offers travel insurance as part of its perks package is going to be worth it if you already purchase travel insurance for trips a few times per year. Keep in mind that travel insurance for a trip can easily cost between $250 and $500. A product like the Chase Sapphire Reserve card covers trip cancellations, trip interruptions, lost luggage, delayed luggage, emergency evacuations, emergency medical, emergency dental and travel accidents for an annual fee that works out to be about the same as purchasing high-end travel insurance for one trip.

Let’s assume for a minute that you’re choosing to pay the annual fee for the popular Chase Sapphire Reserve card. This card comes with an annual fee of $450. This looks very steep at first glance. In fact, we won’t even argue against the fact that $450 is definitely a lot to fork over just to get your name etched on a piece of plastic. However, you can come out ahead with a card like this pretty quickly once you look deeply at the numbers. Chase Sapphire Reserve gives you a $300 annual travel credit for all travel purchases made with your card. Your ability to earn three times the points on travel and dining worldwide also kicks in once you get your travel credit. Don’t forget that it’s probably only wise to sign up for this card during a promotional period that’s offering something like 50,000 bonus points when you spend $4,000 within the first three months of owning the card. A deal like this puts roughly $750 toward airfare, hotels and more back in your pocket. That means you’re more than earning back your annual fee each year. Of course, that’s not even going into the many other valuable perks that go along with this card. The flip side of that is that somebody who doesn’t travel may feel a big hole worth $450 in their pocket.

Does It Pays for Things You Already Use?

Some credit cards that charge fees start to pay you back almost immediately. One good example is the popular Platinum Card by American Express. Of course, sticker shock probably causes many people to back away after finding out that this card has an annual fee of $550 attached to it. This card is admittedly only a product that frequent travelers will really benefit from using. The card is going to give you $15 per month in Uber cash. In addition, you’re getting free access to Centurion lounges. This card also offers five times the points when you book things like flights and hotel rooms. It’s easy to see how a front-end investment can definitely work out to provide savings and quality of experience for the specific customers that a card like the Platinum Card by American Express is made for.

Does the Cash You’ll Get Back Exceed the Amount You’ll Pay in Annual Fees?

Very few cards offer a huge percentage of cashback for ordinary purchases. That’s simply the way it goes! The good news is that you can find tons of no-fee cards that offer 1% cashback on every purchase. Using a card like this can make it easy to come out ahead without sinking any costs into paying for a credit card. You may be tempted to pay an annual fee in order to bump your cash-back percentage to something like the 6% that’s offered from the American Express Blue Cash Preferred card. The fact that this card charges a very reasonable $95 annual fee makes the goal of coming out ahead relatively easy to reach. You have the potential to earn up to $6,000 per year back after investing just $100 when you opt for this card. However, it really takes sitting down and mapping out your spending habits from the year prior to make sure you’ll come out ahead.

Does the Only Card You Can Qualify for Charge an Annual Fee?

Sometimes losing money on annual fees is worth it if you need to build up your credit. Paying off a credit card balance on time is one of the best ways to build up your credit score after it has taken a hit. You may need to do some damage control if you’d like to apply for a mortgage or car loan in a few years. Paying the annual fee on a card is probably worth the loss if you can only qualify for cards that cost money to own.

It All Comes Down to One Simple Equation

Are you getting more back than you’re paying? This is ultimately the only question that matters when it comes to deciding whether or not you should pay for a credit card. The truth in the card world is that most people probably don’t need cards with annual fees. However, people who do benefit from cards with annual fees really benefit from them. The general rule is that people who travel frequently will almost always benefit from the elite benefits that are offered by paid cards. People who don’t travel often may be able to find some paid cards that offer generous cash-back offers. However, people who rarely travel can still do pretty well with non-paid cards that offer standard cash-back rates.

The last tip that applies to everyone is that you should only sign up for any credit card when you see an introductory promotion being offered!

 

https://www.frugaltravelguy.com/

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Earn (pt.)

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Per dollar on eligible purchases with Delta Purchases

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FTG ReviewReward BreakdownPoints Breakdown
  • Earn 40,000 bonus miles and 10,000 MQMs after you spend $3,000 in purchases with your new Card in the first 3 months.†
  • Earn 15,000 Medallion® Qualification Miles (MQMs) and 15,000 bonus miles after you reach $30,000 in eligible purchases on your Card in the calendar year.
  • Earn 2 Miles per dollar spent on eligible purchases made directly with Delta. Earn 1 mile on every eligible dollar spent on purchases.
  • Settle into your seat sooner with Priority Boarding and enjoy 20% savings on eligible in-flight purchases in the form of a statement credit.
  • Pay no foreign transaction fees when you spend overseas.‡
  • Complimentary Delta Sky Club® Access.‡
  • Terms and limitations apply
  • See Rates & Fees

Breakdown

Earn (pt.)

Spend


Per dollar on eligible purchases with Delta Purchases

2.00

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