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When Is a High Annual Fee Credit Card Worth It?

By: Kate Samano August 3, 2022

The credit card industry has evolved greatly over the past few decades. Rather than simply being convenient, credit cards now offer a host of features and benefits. But along with the increase in perks, credit card annual fees have also shot up. Top-tier credit cards can charge $500 or more in exchange for access to their rewards, raising the obvious question as to whether or not any card is worth that expense. The truth is that most high-fee credit cards offer more than enough extras to offset their cost, but you have to be in a position where you can take advantage of them. Here are the times when a high annual fee credit card may be worth it, along with a couple of examples of top-tier cards and the benefits they offer.

When You Can Use the Sign-Up Bonus

One of the main advantages of high-fee credit cards is that they usually come with big sign-up bonuses. Typically, the cash value of these bonuses is more than enough to offset the annual fee. For example, many cards offer bonuses of 50,000 or more points or miles. At the very least, this can often translate to a $500 reward, but when properly used, those points or miles can extend much further. For example, 50,000 miles is often enough to redeem two domestic round trip airfares. At current prices, that could equate to $900 or more. If you’re in a position to benefit, this can make a high annual fee worth it.

When You Spend Enough in Specific Categories

Nearly all rewards cards pay extra benefits in specific spending categories. If in the normal course of your life you end up spending a lot in these categories, then your rewards can rack up quickly. In this case, even a high annual fee card could be a no-brainer. If you’re going to be spending money in these categories anyway, then you might as well get rewarded for it. Just be careful not to adapt your spending just to meet the bonus categories. Otherwise, you’ll likely end up overspending, thereby negating the value of your rewards and actually adding on to the cost of the annual fee.

When You Can Easily Meet the Spending Requirements

Most cards that offer significant rewards require you to spend a minimum amount before you qualify. In most cases, this ranges from $2,000 to $5,000 in the first three months after you open the account. If you easily spend that much on your day-to-day expenses, then you can consider a high annual fee card. But if you’d have to increase your spending just to meet that minimum, then a rewards card might not be the best option for you.

When You Need the Card’s Protections

Rewards cards are well-known for their sign-up bonuses and category kickers, but they carry many additional advantages that are often overlooked. Chief among these are the protections offered by many cards, particularly travel ones. For example, many high-fee travel cards offer lost luggage protection, travel insurance, emergency evacuation protection, trip delay reimbursement, roadside assistance, reimbursement for Global Entry or TSA PreCheck and more. Other cards may offer benefits like cell phone insurance or a free Boingo wi-fi account. If you’re looking for these types of added perks, they can help make a high annual fee worth it.

When You Can Pay Your Balance in Full

No matter how much you earn in rewards from your credit card, if you can’t pay your balance in full, it’s not worth it. Most rewards cards charge annual interest rates of over 20%, meaning you’ll pay an additional $200 for every $1,000 you keep on the card, every year. If you’re using your card for discretionary purchases like travel, that makes things even worse. You’d likely never even consider taking out a 20% or 25% loan to finance a vacation, so you shouldn’t do that with your credit card either. If you have any doubt that you can pay off your balance in full every month, it’s best to just avoid high annual fee credit cards altogether.

Best High Annual Fee Credit Cards

There is no single “best” high annual fee credit card, but these are two of the top competitors. Which one is best for you will depend on your spending patterns and which benefits you need from a card.

Chase Sapphire Reserve

The Chase Sapphire Reserve card offers a hefty sign-up bonus of 60,000 Ultimate Rewards points after spending $4,000 in the first three months of card membership. Additional perks are numerous. Highlighted benefits include the following: 

 

  • 5x points on flights and 10x points on hotels and car rentals booked through Chase
  • $300 annual travel credit
  • 3x points on travel and dining not booked through Chase
  • 10x points on Chase Dining when ordered online through Ultimate Rewards
  • Complimentary DashPass subscription
  • 50% more value on your points when used via Ultimate Rewards
  • $100 fee credit for Global Entry, Nexus or TSA PreCheck
  • Free membership in Priority Pass Select 
  • National, Avis and Silvercar rental privileges
  • Luxury Hotel & Resort Collection benefits
  • No foreign transaction fees
  • Numerous travel and purchase protections

 

With an annual fee of $550, the Chase Sapphire Reserve is definitely in the premium card category, although other cards do charge higher fees. For most cardholders, however, more than half of the annual fee is likely to be countered every year by the $300 travel credit.

The Platinum Card From American Express

The first thing most potential cardmembers notice about The Platinum Card From American Express is the hefty $695 annual fee. If you’re going to pay that much to own a credit card, it better have significant features and benefits – and the Platinum Card From American Express doesn’t disappoint. Here are some of the card’s many highlights: 

 

  • $200 annual hotel credit on select prepaid options
  • $200 annual airline incidental fee credit
  • 100,000 Membership Rewards Points sign-up bonus
  • Over $1,500 per year in statement credits on select purchases
  • 5x points on flights and prepaid hotels
  • $155 Walmart+ credit
  • $200 Uber Casht
  • $240 annual digital entertainment credit
  • $300 Equinox credit
  • $300 SoulCycle at-home bike credit
  • Access to American Express Global Lounges
  • $189 CLEAR credit
  • $100 Saks credit
  • Up to $800 in cell phone protection
  • Premium car rental program status

 

Those perks are substantial, and if you can use them all, you’ll earn back many times what you’ll be paying in an annual fee. The huge sign-up bonus alone more than makes up for the annual fee in the first year, but you’ll have to check your needs and spending patterns to determine if the card is a right long-term option for your wallet.

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