What is the deal with credit card fees? Why would anyone pay fees for credit cards? Honestly, I think I hear lots of people ask these same questions. They are great questions. Is there really any benefit to paying a fee for a credit card? You can get the same perks from non fee cash back cards. At least, that is how some people think.
I often try to see if I can get more bang for my buck. Companies such as Amazon and Costco make you pay fees to get their services for cheaper. Do you use Amazon? Do you pay for Amazon prime? I do! Think about it. You pay about $120 a year to get free two-day shipping. If you like to buy things and order things online it is a no brainer. If you like Amazon Prime movies and TV shows that stream you pay for through the membership.
Lets look at Costco. It is a wholesale retailer that can get you a massive amount of items for cheaper as long as you pay to be a member. Sarah and I buy packs of chicken there all the time. It is cheaper. We can cut up the packs and freeze them to use them for later. Are we saving money? Yes we are!
Credit Card Annual Fees
Lets get to my second question: why would anyone pay fees for credit cards?
The simple answer is you find a value in the card you use. That sounds so simple, but honestly you save money.
Wait, wait, wait… you said we save money. How?
Lets break it down for you.
Fees Save you Money:
Lets say you like to stay at certain hotels like Marriot, Hyatt, or even IHG (Holiday Inn), then you may want to get a co-branded credit card to collect more points in order to get free nights.
Most of the time, these credit cards have fees. When you say fee people may get scared.
IHG Premier Card is a credit card that has a $89 fee.
- 25x points total per dollar spent on IHG
- 2x points per dollar spent at gas stations, grocery stores, and restaurants
- Anniversary Free Night
- Fourth Reward Night Free
- Plus Platinum Status
If you do not even stay at IHG hotels just think about paying $89 a year for a free stay at a Category 7 hotel and below. Basically getting a free night worth 40,000 points. Right there you are saving money.
You could book one free night at the InterContinental Resort in Bali for a romantic getaway. You could use some other points to book additional nights as well. It is a great way to help with cheap and free nights.
Savings are always a good thing. Who doesn’t want a free night at a nice resort?
Lots of Hotel Brands do this.
What about Airline Cards:
We just covered the Hotels now lets talk about airline cards.
Most airline cards will give you a bonus if you sign-up and spend a certain amount in three months like 40,000 miles after spending $2000 in three months. The perks and annual fees ususally come with the travel part. I have used these miles to get free and cheap flights.
Luggage fees cost so much. It is easier to take a carry on. That means you have to pack less.
Here is the deal you can get a co-branded card for your favorite airline maybe United, Delta, or even AA and get baggage fees waived. That could be a savings of $100 or more a year.
Most of these cards have other perks like a lounges access for two times a year, TSA precheck credit, and even Priority Boarding. These are huge savings.
Most cards even waive the $95 fee for the first year. So why not take a dip and get some good perks for a year.
Annual Fees for other cards:
There are a lot of benefits you can get from cards that a fee. Here is a list of some of them.
- No Foreign Transaction Fees
- Rental Car Insurance
- Trip Cancellation/ Trip Delay Insurance
- Baggage Delay Insurance
- Purchace Protection
- Extended Warranty Protection
Each card has other different benefits. Take a look and see if it provides value to you. Never pay a fee if you feel it does not provide value to you.
My Chase Sapphire Reserve Card Fees and Benefits:
I have the Chase Sapphire Reserve Card. Let me be honest it has a hefty fee of $450 per year. Most people would be like “Whoa!!” I said that too, but looking at the benefits of it I said why not.
Benefits: +$300 Travel Credit
Once a year, I receive a $300 travel credit. Anything that is considered travel counts. Airlines, tolls, airbnb, hotels, and the list can go on. If it is considered travel the expense is wiped out.
The fee is now down to $150 per year.
Chase UR points are worth $0.015 per point using the travel portal. We get 3x points for travel or dining expenditures. Chase UR points are worth around $0.02 per point through travel partners.
If we spend $3000 a year on the card for travel or dining we would break even with the points value.
Since the beginning of the year we have accumulated 69,450 points. I did pay for wedding using my card, and I helped others with buying flights. With that amount of points could be worth $694 for straight cash back or use it in the travel portal for a whopping $1041 for travel.
I used 47,000 points to help Sarah and I have a free round trip to Indonesia through the portal. That is quite valuable to us for free travel.
We could also use those points to buy nights at hotels and flight through travel partners. More free travel.
Car Insurance: +$50
The card also gives primary car insurance for rental vehicls. No more buying insurance for a rental. Your credit card has you covered in case of an accident.
Card Bonus: $750
The card bonus is not as big as it was when it was released. It was at one point 100,000 points, which can be $1000-$2000 depending on what you base your points off of. The current bonus it 50,000 points and if you use it in the travel portal at $0.015 per point that is roughly $750 not so bad.
Credit cards come with some great bonuses. Win win. I love a good bonus.
Priority Pass Lounge Access: +$150
The card comes with the Priority Pass Lounge Access. I would not go to lounges if I had to pay for them. We are frugal money saving people. The card comes with a pass to visit Priority Pass Lounges with two guests free access. The cost is around $30 for entry so if my wife and I visit at least three lounges in a year that is around $180. Free food, free internet, and a chance to sit in a quieter part relaxing in the airport, I say “YES.”
This year alone I have been to 15-20 different lounges. We saved a ton of money on food and drinks this year in airports.
These are just some of the multiple benefits.
There are many other cards that have either higher annual fees or ones with the $95 per year fee. Just take a look and see what you may like.
Cancelling Credit Cards:
Lets say we no longer find value in the cards we have due to fees. We can cancel them. It is quite easy.
Lets be wary that your credit score is based upon a couple of factors. One being the oldest credit. So if you have a non fee credit card like a Discover It card or a Chase Freedom. Just keep it. No use in destroying your credit score.
Cancelling those fee credit cards may not be so bad. You can pick up the phone and call them, and they may even waive the fee, offer a bonus to keep the card (more value), or cancel it for you.
It never hurts to pick up the phone and call.
Some cards are honestly not worth having any more. I am sitting with a card that got me 60,000 miles for American Airlines, but I have no value for the card. I just got it for the bonus, which was to pay the annual fee and get 60,000 miles. Basically that is like getting $600 by paying $95. Win win for me, but now the card is not worth it.
Time to call and cancel.
Those are my thoughts about fees. Let me know your thoughts. Feel free to leave a comment or ask a question in the comments.
“Travel is the only thing you buy that makes you richer”