Looking for a new travel credit card can be a roller coaster ride. Often, the sign-up bonus seems good; the earning perks and rewards seem favorable; but then you see the annual fee, and it’s pricey. Annual travel credit card fees can be hundreds of dollars. You might even wonder why there’s an annual fee at all, or maybe you currently hold a credit card that’s changing raising its annual fee and changing its perks, like the Chase Sapphire Reserve recently announced.
Is it worth paying an annual fee for a travel credit card? How much should you pay? Here are the five things to consider.
Will you use the benefits?
Some credit cards come with hefty annual fees in exchange for plenty of good benefits: airline fee waivers, seat upgrades, and airport lounge pass memberships. Are those things that you would normally pay for anyway? If so, you can just stop paying for them individually, pay for a credit card annual fee instead, and earn points or miles in the process.
How much do the benefits cost in comparison?
Before you just automatically jump to the conclusion that the benefits the card offers are worth the annual fee, sit down and do the hard math. Do the benefits offered equal a monetary value that’s equal to or greater than the annual fee? Did you actually use those benefits as much as you think you did over the last year?
While the benefits may seem good at first glance, you want to make sure that your numbers are correct before signing up for the card. You may find that some of those benefits will help offset the annual fee. However, will you be using those benefits enough to justify the cost
What’s your credit score?
In some cases, you won’t be able to get a credit card that has no annual fee, particularly if you don’t have a great credit score (or even a good credit score, to be honest). If that’s the case, just look for a card with a relatively low annual fee (around $100). Then you can avoid paying an annual fee that’s on the larger side (upwards of $500) and work on building your credit until you do qualify for a no-fee card.
Conversely, if you already have a card with an annual fee and you’re considering getting rid of it, think about your credit score then, too. Will canceling the card hurt your credit score? If it hurts it a great deal, you might just decide that keeping the card and paying the annual fee is worth it. A better option would be to downgrade your current card to a no annual fee if you can longer justify the annual fee, but don’t want to cancel the card outright.
What’s the sign-up bonus?
In addition to looking at the value you’ll get from a credit card’s benefits, also look at the sign-up bonus. You might find that the monetary value of the sign-up bonus is greater than the cost of the annual fee. For example, the Chase Sapphire Preferred has a sign-up bonus of 60,000 points after meeting the required minimum spend, which at its base value is worth $750 in travel … so the sign-up bonus is more than worth the $95 annual fee.
Keep in mind that introductory sign-up bonuses change all the time. So if there’s a card you’ve had your eye on for a while and the sign-up bonus isn’t preferable now, you might be able to wait and get a better deal that makes the card’s annual fee worth it. There are also plenty of credit cards that waive their annual fees during the first year of card membership.
Also, if the bonus comes in the form of miles or points, make sure to look at the monetary value of those miles or points at the time of sign up. The value for these also fluctuates, depending on a brand or loyalty program’s changing policies. Note that some of the miles credit cards offer a bonus when redeeming their points through their online portal, but in many cases you can get more value by transferring them out to an eligible travel partner.
Are you playing the miles and points game?
For many people who play the miles and points game (in other words, racking up as many miles or points as possible in order to gain free travel for your dream vacation), sometimes getting a credit card with an annual fee is worth it. That card allows them to transfer points or miles to another credit card they have in their wallet. Then they might get a better value for those miles or points.
Similarly, they might value the points and miles-earning potential a card offers enough to pay that annual fee. After a little maneuvering of points and miles from account to account, they might find that they’re getting more than the cost of the fee in value.
However, keep in mind, especially for those who aren’t well versed in earning points and miles, this process can be a little convoluted and tricky. If you’re not careful and you don’t put a lot of time into researching the best processes, you could end up not getting your money’s worth.
For non-premium travel cards, the annual fee is often under $100. That means that with just one trip, you can likely get your money’s worth from the annual fee, depending on the card. For instance, some airline cards give you access to an airport lounge and free checked bags, which otherwise would cost over $100. Most hotel cards give you a free night—usually a value over $100.
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Johnny Jet travels to 20+ countries a year to share firsthand knowledge of reward travel, credit card deals, destination tips and more on JohnnyJet.com. Sign up for the JohnnyJet.com Daily Travel Tip newsletter here.