Travel Rewards Credit Cards – Justifying Annual Fees

While I am open to paying annual fees on credit cards, the points and benefits earned MUST outweigh that cost of card membership! Otherwise, the card goes against everything that this site and this hobby stand for – enhancing your travel experience while saving money in the process!

From the Premium Travel Rewards Credit Cards to the No Annual Fee Travel Rewards Credit Cards, they all have a cost of ownership, and it takes some careful analysis and consideration in order to ensure that we are always coming out on the positive end!

Wait… what cost is there to justify on a “No Annual Fee” Travel Rewards Credit Cards?

Ain’t no such thing as a free lunch people! That no annual fee card could be sucking up credit line that could be extended to another more rewarding card!?

What to Consider When You’re Considering:

First Consideration – How much is the annual fee?

Personally, I break down travel rewards credit cards into 3 annual fee categories (Note – I use annual fee as the measure since that most typically aligns with the value provided, although there are definitely outliers):

Premium Travel Rewards Credit Cards – Annual Fee Range $196-$550+

Some of the more popular premium credit cards include the Chase Sapphire Reserve, Amex Platinum, Citi Prestige, and the U.S. Bank Altitude Reserve – all of which offer some or all of the benefits listed above. Additionally, you have the handful of premium co-branded credit cards – i.e. the Ritz-Carlton Rewards Card, Citi AAdvantage Executive, Delta Reserve, United MileagePlus Club Card, etc – which focus primarily on benefits relating to their specific loyalty program.

Standard Travel Rewards Credit Cards – Annual Fee Range $1-$195

This standard category is definitely the most popular among card issuers and includes cards like the Chase Sapphire Preferred, Amex Premier Rewards Gold, Amex Everyday Preferred, Citi Premier, and the Barclaycard Arrival Plus – all of which offer some or all of the benefits listed above. Additionally, you have the slew of co-branded credit cards in this category from virtually every hotel and airline loyalty program known to man – Hilton, Marriott, Hyatt, SPG, Club Carlson, IHG, Delta, United, American Airlines, Alaska Airlines, Southwest, JetBlue, etc. Just name an airline or hotel and I will show you at least 1 (and maybe 2 or 3, possibly issued by different banks!) travel rewards credit cards!

No Annual Fee Travel Rewards Credit Cards – Annual Fee Range $0

Free? That’s for me! Some no annual fee cards include the Chase Freedom, Chase Freedom Unlimited, Chase Sapphire, Amex Everyday, Amex Blue Sky, the BankAmericard Travel Rewards Card and more. Some of these may technically be “cash back” rewards cards, rather than travel related, but when combined with a standard or premium card earning a similar currency, they can slide into the travel rewards category.

Additionally, you have some no-fee co-branded credit cards in this category from many hotel and airline loyalty programs – Hilton, American Airlines, Southwest, JetBlue – but these really dont provide the same perks/benefits as their premium and standard card counterparts.

Could there be more categories? Sure, knock yourself out! But for the purposes of this discussion I think we have things covered with the three above!

Second Consideration – How much ongoing value will it provide?

Sign-up bonuses are the single best way to rapidly accrue points and miles. For this discussion, we are tossing those instant boosts aside and instead, limiting our focus to the ongoing value provided by a credit card.

If you intend to hold a card long-term and continue to pay the annual fee year after year, it is very important to distinguish between the one-time value and ongoing value. Whether that initial sign-up bonus is 100,000 points or 1,000,000 points, if the card cannot provide you ongoing value year after year, it’s not worth hanging onto!

Premium Travel Rewards Credit Cards – Ongoing Value

Your value analysis should include placing a value on any and all of the following: Annual Travel Credits, Global Entry/TSA PreCheck (once every five years), Lounge Access, Redemption Advantages, Spending Multipliers, Hotel Perks, Airline Perks, Rental Car Status, Travel & Purchase Protections, Other Perks (like Boingo Wi-Fi Plan, ShopRunner 2-Day Shipping, GoGo inflight wifi passes, etc.)

Standard Travel Rewards Credit Cards – Ongoing Value

Your value analysis should include placing a value on any and all of the following: Spending Multipliers, Travel Credits (less than their premium counterparts), Redemption Advantages, Hotel Perks, Airline Perks, Travel & Purchase Protections, Other Perks (like Boingo Wi-Fi Plan, ShopRunner 2-Day Shipping, GoGo inflight wifi passes, etc.)

No Annual Fee Travel Rewards Credit Cards – Ongoing Value

Your value analysis should be pretty easy, considering the value creators are limited and fairly straightforward: Spending Multipliers, Redemption Advantages, loyalty points/miles earning, etc.

Third Consideration – Other factors…

Sure, your travel rewards credit card may be providing you value year over year, but is it providing you as much value as that travel rewards card you’ve seen advertised at halftime of your favorite sporting event!? (Tip – Jennifer Gardner is not advertising the card that will provide you the best continual value!)

Managing a rewarding credit card portfolio is not as simple as signing up for any and all credit cards. You may want to think about some or all of the following when considering when to keep/cancel those travel reward credit cards.

Card Issuer Rules – Chase, Amex, Citi all have imposed specific card rules in order to restrict approvals/sign-up bonuses to customers who have recently taken advantage of multiple card offers. Closing a card may prevent you from having that card again in the near (~2 years or more) future!

Current Credit Portfolio – Based on where you have credit, it may or may not be more difficult to shift credit or have additional credit extended. Maintaining a relationship with credit issuers is important and I always try to make sure I keep at least one card/credit line open with each issuer at any given time.

Loyalty Points/Miles Expiration – Is your $5 latte on your co-branded credit card the only thing keeping your AAdvantage miles current? Something to keep in mind as you manage your rewards, credit card accounts and associated annual fee payments!

Final Thought

Credit card companies are willing to shovel tens of thousands of points, worth hundreds and thousands of dollars, so take advantage of it! Do NOT let $95 (or other annual fee amount) prevent you from your achieving your travel dreams!

9 times out of 10 my credit card applications are for cards WITH annual fees, ranging from $69 to $450 per year. Sometimes these apps are purely for the initial sign-up, but many times I hold on to the cards for the long run. The key is being able to leverage the benefits and knowing when to downgrade annual fee cards to no-annual fee options to avoid ongoing costs when the cost outweighs the benefits! I am more than willing to put up a little cash up front (i.e. a $95 annual fee) for the opportunity to leverage rewarding card benefits into the future!

How do you feel about maintaining multiple annual fee cards? Do you have a set limit on the annual fees you are willing to pay? $100… $1,000… $10,000!?!?!?!?

Happy Travels!

DW