Credit Card Annual Fees | Understanding the Value & Why It’s Sometimes Worth Paying

Hi there, it’s Ernest from Trip Astute. In
this video, we’re discussing why it’s sometimes worth paying an annual fee on
your credit card. (light chiming music) So I was having a conversation with some friends the other day, and the topic of credit cards came up. One of my friends said, “why would
anyone ever pay a fee to use a credit card?” My response to her was that it was
less about the cost, but instead, the value that you get from a card. I
decided to do a video on the topic since it’s one of those questions that I get
asked all the time from folks who are starting the points hobby, and are
skeptical of whether they would benefit from paying an annual fee on their
credit card. In this video, I want to share with you why I pay the annual fee
on certain cards, and give you some examples of cards with fees that I find
extremely useful. Keep in mind that while I may take advantage of certain card
benefits, you may or may not find them to be useful as well. Number one: Sign-up
bonuses. Probably the biggest reason to get a card with an annual fee is to get
a large sign-up bonus. Card offers can sometimes be worth over a thousand
dollars if redeemed properly. Some examples of large signup bonuses in the past
are the American Express Platinum and the Chase Sapphire Reserve. Even in July
2017, Chase is offering an 80,000 point bonus on its Ink Business Preferred card
and Citibank is offering a 75,000 point bonus on the Prestige card. Number two: No
foreign transaction fees. Most premium cards with annual fees do not have a
foreign transaction fee, which saves you money while traveling abroad. Number
three: Bonus categories / earning rates. Cards with annual fees often reward you
with bonus points at certain categories. For more information, check out some of
our other videos like the Chase 101 and the Travel Rewards 101 video. Number four:
Perks. I won’t go into all the perks available,
as they differ with every card, and I’ve covered them in some of the other videos.
However, here’s a quick list of some popular perks that you’ll often find on
these cards. Number five: Special offers. Some cards
give you special offers, discounts, or memberships to their users. For example,
American Express offers some of it’s card members access to Shoprunner, which
gives you free two-day shipping on many shopping sites. It’s like having Amazon
Prime for other retail sites. Number six: Annual bonuses. This is a huge reason to
pay an annual fee. Many cards with an annual fee give you a bonus every year.
It can be a travel credit, free hotel night, or points, depending on the card. As
of July 2017, the cards I use with annual fees includes the following list. The
Chase Sapphire Reserve is an awesome card for so many reasons already
discussed in this video. It’s my go-to card for travel and dining expenses.
Though the annual fee is $450, I feel like I’m able
to squeeze a lot of value out of the card. If you factor in the annual $300 travel credit, the annual fee is more like $150, which is only $55 more than the Sapphire Preferred. The
Chase IHG Rewards Club Select is a card that I don’t really use, but pay the
annual fee every year. Why? Because the annual fee is only $49
and includes an increase in status level, as well as an annual free night at an IHG
brand hotel, such as the Intercontinental, Hotel Indigo, Crowne Plaza, and Holiday
Inn. I’ve easily been able to use the free night every year for a luxurious
hotel stay, so for me, it’s completely worth paying the annual fee. Also, I set
a small reoccurring charge on it every month to keep the account active. The
Chase Hyatt Rewards card has a slightly higher annual fee, but like the IHG card,
gives me a free night and increased status. I love the Hyatt portfolio of
hotels, especially the Andaz brand. Paying the annual fee of $75 make
a lot of sense since a room is generally double or triple that amount. The Chase
United MileagePlus Explorer card has a $95 annual fee. This is a
card that I have contemplated canceling, especially since I have lounge access
through my Sapphire Reserve, and don’t usually use the free checked bags. I’ve
decided to keep it though since I usually end up taking advantage of the
United lounge passes. Also, with the card, I get access to additional reward
booking availability through United, which makes it easier to book a reward
flight. The Club Carlson Premier Rewards card is one that I am contemplating
whether I want to keep. I get 40,000 points each year for keeping the card,
but I haven’t had many opportunities to redeem the points. We’re hoping to do a
Europe trip later this year, so hopefully I’ll be able to take advantage of the
points that I’ve accumulated over the years, but I’m still in the fence on
whether I want to keep this card. Also, here are some tips for managing cards
with annual fees. Number one: Set a reminder to re-evaluate your card
membership every year. It’s important to review whether you are getting the full
value from your cards. Considering that life changes all the time, it’s good
practice to reflect on your current and future spending.
I would suggest making a decision on whether you want to keep your card
around month ten of your anniversary. You definitely want to make a decision prior
to the annual fee being charged to your account. Otherwise it can be difficult to
get a refund on the fee. Number two: Downgrade your card if necessary. If you
decide that you’re not going to be benefitting from your card, then consider
downgrading to a free version of your card. Here are some examples of the
conversions you can make on some of the popular premium cards. I prefer
downgrading than closing an account since closing tends to have a more negative
impact on your credit score. For example, when I got the Chase Sapphire Reserve
card, it was pretty clear that it was going to replace my Sapphire Preferred
card. So instead of canceling the Sapphire Preferred, I converted it to the
Freedom Unlimited card since it was one of the cards that I wanted to get. I gave
up the opening bonus on the Freedom Unlimited card by choosing to convert my
Sapphire Preferred, rather than opening a new account. But
the opening bonus for the Freedom Unlimited was not very big and I plan to
keep the card for the long term. Plus, I avoided having the additional credit
inquiry and the card did not apply to Chase’s 5/24 rule. Number three:
Plan your card strategy. Like tip number one, think about your long-term travel
goals. Do you plan to travel in the future? If so, what types of points are
you looking to build, and are there certain programs that might be better
suited to meet your goals? Also, think about your future daily spend. Are you
planning to eat out as much? Or maybe you anticipate more grocery spend. Will you
be buying a house or car? All these factors should shape your card strategy.
Number four: Time bonus offers. This is really important. Certain cards have
seasonal bonuses, so it’s worthwhile to research to see whether it’s a good time
to apply for a certain card. What are your thoughts on paying the annual fee on
credit cards? Please share them in the comment section below.
Also, let us know if you have any questions and consider subscribing to
our channel. It’s free, and you’ll get notifications on all our new updates.
Lastly, in case you’re wondering where I am, we recently moved to a new location.
In future videos, we’ll be using our new set, so we wanted to give you a quick
preview. Until next time, travel safe and travel smart.

6 thoughts on “Credit Card Annual Fees | Understanding the Value & Why It’s Sometimes Worth Paying

  • Another great review Ernest !!! My Friday is complete ­čÖé . I'm a fellow Chase Sapphire Reserve member so worth it to pay for the free !!

    Jose P.

  • I'm thinking about getting the Amex Plat early next year. Right now I have the CSR trifecta. But having 2 cards with huge annual fees, I'll just have to think about that one. Early next year I'm thinking Amex Platinum and Hyatt cards….what do you think? I'm looking at the Maldives so that Hyatt card will come in handy!

  • This is one of my fave Trip Astute vids.┬á Annual fees are more than worth it if you're getting value out of it that offsets the fee.┬á CSR is basically free for me even if I didn't put any spend on it.

  • I think it's important to be able to differentiate between Real Value and Perceived Value. Things like Airline/Hotel credits where you were going to pay for the airfare/hotel anyways is Real value. Things like lounge access or upgrades that you never were going to pay for in the first place is only a "perceived value" because it didn't actually save you any money. I find it silly when people brag about how they redeemed miles for a First class flight that would have cost 10k… well were you ever going to drop 10k of your own money for this ticket in the first place?

  • I need to get a credit card so that I can borrow money so that I can build my credit so that I can borrow more money. #daveramsey

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