Many premium credit cards with excellent benefits charge an annual fee that you will have to pay to remain a card member each year. As a result, many individuals steer clear of annual fee credit cards to reduce their costs. Unfortunately, cards without annual fees often offer fewer benefits.
These three tips will help you determine if annual fee credit cards are worth it. Keep reading!
1. Can you afford the cost?
Is it worthwhile to pay an annual fee on credit cards? It depends on your financial situation and if you can afford the yearly fee. You do not want to purchase anything that might put you in debt or increase your financial stress.
In addition to the annual fee, you should consider whether you keep your credit card balance paid off in full each month. The best way to avoid credit card interest is to pay off the entire balance. Because interest on credit cards can rack up quickly. Adding an annual fee to your card will inevitably make it more expensive if you carry a balance.
2. Will you get more value back for paying the annual fee?
A $400 annual fee may not be worth it if the value of the benefits you receive doesn’t equal or exceed $400. Sometimes, it is easy to determine whether the benefits outweigh the annual fee. For example, The Platinum Card by American Express offers rewards like a $200 CAD Annual Travel Credit and the average value of $550 at over 1,000 extraordinary properties worldwide when you book Fine Hotels + Resorts. Add this with access to many leading hotel and car rental companies’ loyalty programs; then, you are getting more value from the card than what you paid for the annual fee.
Sometimes, however, it is necessary to do the math to ensure regular expenses offset your annual subscription fee.
Suppose it’s a cashback percentage. Look at how much you spent on eligible purchases, then multiply that by the percentage and see how much you’ll get back on eligible purchases. As an example, the New SimplyCash™ Preferred Card from American Express offers 10% cashback on all eligible purchases (up to $400 cash back) for the first four months (then 2%) of Cardmembership and has a $99 annual fee. If you spent $3,000 on any eligible purchase within the first four months, you could multiply $3,000 by 0.10 to get $300 in cashback. This cashback has more than offset the $99 annual fee.
3. Are you sure of putting the rewards to use?
Annual fee credit cards offer some of the best rewards. For example, MBNA Alaska Airlines offer rewards on tickets, vacation packages, and cargo services from Alaska Airlines.
While these rewards can be valuable, they’re only worthwhile if you use as many of them as possible. Annual fee credit cards may not be worth it if you don’t expect to be able to take advantage of its rewards. Before deciding whether to apply for a card, consider each card’s benefits and whether you will actually use them.
In conclusion
Before applying for annual fee credit cards, check whether a more affordable card offers the perks you appreciate most. However, if you realize that a card can provide you with the best value despite high fees without you having to adjust your spending habits, there’s no reason not to get it.