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How to know if your credit card is worth the annual fee

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The benefits of credit cards are great, but how can you be sure they’re worth the annual fee? These annual fees can be significant. Study 2019 found that the card fees average nearly $ 110 per year, although some cards charge a lot more, such as the $ 550 fee for the Amex Platinum or Chase Sapphire Reserve card. Here are a few things to consider when trying to decide if these high fees are worth it.

Is there a signup bonus?

A signup bonus can go a long way towards offsetting annual fees. For example, a Chase Sapphire Preferred card has an annual fee of $ 95, but it also currently offers a sign-up bonus of 80,000 points. valued at approximately $ 1,000, provided you spend $ 4,000 on the card in the first three months. However, a caveat: you should only spend $ 4000 if you can pay back the full amount almost at once and avoid paying interest. Otherwise, the bonus is not worth pursuing.

Can you offset the annual fees without a sign-up bonus?

You’ll also want to carefully consider how many points you hope to earn based on your existing spending. Does the card offer point multipliers for certain categories of spending that you will actually use? What is the monetary value of your reward points? (The Points Guy has a great guide compiling the redemption value of reward program points here). If you think you won’t be spending enough to offset the annual fee, think twice before signing up for the card.

For example, excluding a welcome bonus, you will need to spend a combined $ 4,750 on eating and / or travel each year to offset the Chase Sapphire Preferred annual fee of $ 95, by CNBC. If that sounds reasonable to you, it’s probably worth it.

What are the advantages?

the Chase Sapphire Reserve Card (the premium version of the Sapphire Preferred) is a great example of a card with high fees that might be worth it for the avid traveler. It costs $ 550 a year, but you also get $ 300 in travel vouchers, which brings the cost down to $ 150, which can be offset by a host of other perks, from airport lounge access to reimbursement of global entry and TSA pre-check. administration fees, and more.

Generally speaking, premium cards can offer free stays, free checked baggage, travel insurance, priority boarding, or a variety of other benefits. Think about the dollar value of these perks and decide if the expense is worth it for you.

Are you a brand loyalist?

If you are a frequent business traveler and tend to stay in hotels associated with a particular brand, it may make sense to pay a fee to accumulate additional points, even if the benefits are limited to that single brand ( co-branded cards for a specific airline are a prime example). Many branded cards don’t have an annual fee, and their rewards are just as generous, so you’ll want to do your homework.

Don’t look for rewards if you have a balance

If you still have a balance on your card, rewards cards probably aren’t for you. Reward cards tend to have high interest rates, and paying late can easily void any benefits you earn.


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