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

Source: Youtube


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