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Some credit cards can earn you generous rewards in the form of cash back, points or travel miles simply for making your usual purchases. You may, however, be required to pay an annual fee for the privilege of being a cardholder. These fees can be worth it, depending on the rewards and perks that come with the card, but it's not always an easy calculation to make.
Benefits offered may have a clear value, such as increased rewards rate on purchases, statement credits and access to membership programs. Others are harder to evaluate, but the services and protections these cards provide may be more than worth paying the card's annual fee. Here's how to tell if you're getting a big benefit for the cost.
What Do Rewards Cards With an Annual Fee Offer?
Rewards cards that have annual fees may charge anywhere from about $50 for entry-level rewards cards to over $500 for premium cards. Higher annual fees generally correspond with larger intro offers, more rewards and better benefits.
What you may expect from the top rewards cards includes:
- More points or cash back on purchases
- Monthly or annual statement credits
- Free access to membership programs
- Status in loyalty programs
- Concierge services
- Higher limits and better coverage on insurance policies and purchase protections
- Extra perks on luxury travel
Many premium cards also provide travel-related benefits by not charging foreign transaction fees, for instance, or by providing free access to airport lounges and loyalty status. However, credit card issuers can also respond to changing demand. As people scaled back their travel plans due to the coronavirus pandemic, several issuers let cardholders receive statement credits on purchases from non-travel categories, such as grocery stores, restaurants and gas stations.
Take the temporary updates Chase made to the Chase Sapphire Reserve®, one of the most popular premium cards (and one that carries a $550 annual fee). In addition to broadening its statement credit criteria, several other changes were made to increase the value and benefit the card provides to cardholders who aren't currently able to travel. These included temporarily reduced renewal fees (either directly or through statement credits), additional bonus points on select purchases, and extra value when redeeming points to offset eligible recent grocery store, dining and home improvement store purchases.
When Are High Annual Fee Cards Worth Keeping?
If you choose to sign up for a card with a high annual fee, an important aspect of managing it is to make sure you're prepared to pay for it and to occasionally reevaluate whether it's worth keeping. Consider how much you expect to spend using the card and compare your earnings to what you could receive from a card that doesn't have an annual fee.
For example, the Chase Sapphire Reserve® gives you 3 points per dollar on dining and travel, which is equivalent to 4.5% cash back when you receive a 50% bonus for redeeming your points for travel through the Chase Ultimate Rewards portal. But you usually only get 1 on other purchases—equivalent to 1.5% cash back. By comparison, the Citi® Double Cash Card - 18 month BT offer offers up to 2% cash back on every purchase. There are also many rewards cards that offer 1.5% cash back without charging an annual fee.
Rewards aside, consider which cardholder benefits you expect to use. For example, travel cards may come with a free Priority Pass membership, which gives access to certain airport lounges. While you might earn more on everyday purchases with a no-fee card, there's certainly a value in getting to step away from a crowded airport terminal and into a lounge that has free Wi-Fi, food and drinks.
A Closer Look at Popular Cards With High Annual Fees
There are a handful of premium cards, including co-branded options that are tied to a specific airline or hotel program. Here are two premium cards that provide a wider range of benefits.
Chase Sapphire Reserve®
The Chase Sapphire Reserve® has a $550 annual fee and rewards focused on dining and travel benefits. You can earn bonus points on travel and dining purchases, and $300 in an annual travel statement credit to help offset the annual fee. These credits can go toward a variety of travel purchases, including airfare, hotels, campgrounds, rental cars and toll bridges. You can also get $60 in annual DoorDash statement credits in 2020 and 2021.
You'll also receive a variety of benefits when booking travel with the card, including trip cancellation or interruption coverage, roadside assistance (with up to four $50 services each year covered) and primary coverage on rental cars for a collision or theft. After you enroll, you can also get complimentary access to airport lounges and up to $100 in statement credits every four years for a Global Entry or TSA Precheck membership.
As a cardholder, you'll receive 50% more value from your Chase Ultimate Rewards points when you redeem the points for travel (100 points is worth $1.50 rather than $1, for example) through the Chase Ultimate Rewards travel portal.
Other Chase cards, such as the no-annual-fee Chase Freedom Unlimited®, offer 1.5 points per dollar on every purchase—more than you'd receive from non-bonus category purchases with the Chase Sapphire Reserve®. However, you can transfer points from other Chase accounts, including those that belong to your household members, to your Chase Sapphire Reserve® account. By combining the cards, you may be able to maximize your earnings opportunities and redemption value.
Platinum Card® from American Express
The Platinum Card® from American Express also has a $550 annual fee and dining and travel benefits. You can earn bonus points when buying flights directly from airlines or with American Express Travel, or paying for a prepaid hotel stays through amextravel.com. It's also best to redeem your Membership Rewards points for travel.
While there's a steep annual fee, the card offers multiple statement credits:
- $200 annual airline fee credit on incidental fees when you select one qualifying airline
- $50 Saks Fifth Avenue credit (available twice a year; once in the first half of the year and again in the second half); enrollment required
- $200 Uber Cash credits for rides or Uber Eats ($15 a month and a bonus $20 in December)
- Up to $100 every 4 years for a Global Entry membership or every 4.5 years for TSA Precheck membership
- Up to $20 monthly (through December 31, 2020) for select U.S. streaming services
- Up to $20 monthly (through December 31, 2020) for U.S. wireless service charges
Cardholders also get free access to American Express' global lounge collection and gold status in the Hilton Honors and Marriott Bonvoy loyalty programs. Terms apply.
What About Less-Expensive Rewards Cards?
While premium credit cards come loaded with benefits and statement credits, there are also more moderately priced rewards cards. These may offer good rewards and a few perks, but they won't give you the luxury edge and major benefits that comes with premium cards:
- The Chase Sapphire Preferred® Card costs $95 a year and doesn't come with any statement credits. But you can earn 2 points per dollar on dining and travel purchases (1 point per dollar elsewhere), get 25% more value when redeeming points for travel through Chase's Ultimate Rewards portal and receive free primary coverage on rental car collision damage waivers.
- The Capital One Venture Rewards Credit Card also has a $95 annual fee. The card offers 2 points per dollar on every purchase and up to $100 in statement credits for a Global Entry or TSA Precheck membership every four years.
- The Blue Cash Preferred® Card from American Express has a $95 annual fee (after an introductory annual fee of $0 for the first year) and is one of the top grocery store cards. It offers 6% cash back on up to $6,000 in purchases at U.S. supermarkets each year (1% after that), along with 6% cash back on U.S. streaming service subscriptions, 3% U.S. gas stations and transit, and 1% elsewhere. Terms apply.
The same work goes into determining if a card is a good pick for your wallet. Consider the fee, rewards and benefits, and see if you'd be better off with a no-fee card or with a premium card.
Check Your Credit Before Applying
The best rewards cards often require good to excellent credit. Before applying, you can check your credit score for free through Experian. You can also review your credit report to find out what's helping or hurting your score, and get tips on what you can do to improve your score.
If you're still on the hunt for the right credit card, use Experian CreditMatch™ to see card offers personalized to your credit profile. CreditMatch™ can also help you find the best credit card with no annual fee.