Chase Sapphire Reserve and Gold Delta Skymiles card from american express
Credit Cards

Why I tell people to ignore credit card annual fees?

A lot of what I like to write about here is based on the conversations and questions I get from friends and family on credit cards. As theĀ somewhatĀ designated credit card consultant, I enjoy talking to friends and family about the benefits of credit cards and hopefully sway them in the right direction.

I was recently speaking to my brother about credit cards and he was asking me what I thought about the new Marriott credit card. While I admittedly gave him a summarized version from the credit card’s website, there was one intriguing question that I wanted to elaborate on.

“Ya I was attracted to the 100,000 points sign-up bonus, but what is the annual fee?”

“$95”

“Oh. I’m already paying $340 in annual fees, I’m not sure I can take on that much more per year”

This is what I dream for — the ability to prove to someone why getting a credit card makes complete sense, financially.

So first, let’s evaluate the above situation

I won’t dive into the details of the Marriott credit card, but I will use it to point out the obvious reason why credit cards make so much sense.

In this scenario, the new Marriott credit card has a $95 annual fee, which is the one thing holding my brother back from my applying to the card. I don’t think he should be looking at it in that way at all.

If he is able to spend $5,000 in the first three months he’ll receive 100,000 Marriott points. Depending on how he redeems those points, and how much value you put on Marriott points, those points are easily worth a few hundred dollars in value. So, in the first year I think the $95 annual fee is more than made up for.

After the first year, no matter how much spend he puts on the card, he’ll get one free night award every year, up to a 35,000 points/night value (a Category 7 hotel). I won’t go through all of his options in this post, but you’ll find that there are opportunities where he could get upwards of $300 in value from that one night award.

Miami Marriott Biscayne Bay
Get a free night at the Miami Marriott Biscayne Bay — average retail around $200+

I don’t know about you, but to me that more than justifies a $95 annual fee.

But what if their is no anniversary night certificate?

I think that in general, anniversary night certificates more than pay for themselves. Cards like the World of Hyatt Credit Card or the IHG Credit Card offer their own free night certificates, and I think they as well make those cards no-brainers, but other situations may take more consideration.

There are a few things I consider when determining whether an annual fee is worth it:

  • Is there an anniversary free night award?
  • Is there increased bonus spend that I would otherwise not get?
  • Is there a certain perk that gets me some kind of yearly value that outweighs the fee?

I’ve broken down the first one, but when there is no free night award, I essentially need to find value somewhere else from the card that justifies the fee (I think a bit obvious, maybe).

What are the other things I value in a credit card?

There are certain cards, like the Chase Sapphire Reserve, that get me out-sized value from simple bonus spending on the card. As someone who spends much of their time on the road, I am able to get a ton of value from the travel and dining bonuses. If another card comes along with similar spend bonuses, and no other real benefits, I wouldn’t be able to justify the annual fee on both cards.

But then come the perks that many of these premium travel cards offer on top of their spending bonuses. Cards like the Platinum Card from American Express or the Chase Sapphire Reserve offer a slew of benefits that I think far outweigh the benefits.

KAL Lounge LAX airport
I was able to take advantage of the KAL Lounge in LAX last year because of my Priority Pass membership.

I am able to get a ton of value out of the Priority Pass membership, as well as the Global Entry free credit, but these benefits once again overlap from card to card — so each scenario will differ per cardholder.

What I consider to be the best perk is the ability to transfer credit card points to airlines or hotels. I don’t think I need to explain this anymore than I already have in previous posts, but I think that these cards transfer partners more than justify the annual fee.

Like the cards mentioned above, there are many unique partners across

Bottom Line

There are more than enough reasons to justify an annual fee, but I ultimately try to instill the fact that you should weigh the value a card provides rather than the simple annual fee you will incur. Taking a closer look at the benefits and the spending opportunities of the card will do you a great justice in determining whether or not you should sign up for the card.

Instead of looking at the amount of annual fees you’ll be paying, instead determine the value that you can get when paying that annual fee

Tucker is an avid points and miles enthusiast. Being fully involved in the world of credit cards and frequent flying for only a few years now, he brings a very fresh and unique perspective to the world of travel.

One Comment

Leave a Reply

%d bloggers like this: