Noob Q&A: “Do you ever pay annual fees on a rewards credit card?”
I was recently emailed this question, and since I get asked this question A LOT, I thought I would tackle it in the Noob Q&A corner. Game on!
Question: “Do you ever pay an annual fee on a rewards credit card?”
Ok, I’ll elaborate.
First of all, I usually always try for a retention bonus (getting harder to get) on the cards that I think are worthy of paying an annual fee on. I like playing chicken, Kevin Bacon style, with the credit card companies.
I try not to cancel my cards, because canceling a card shortens your average age of account. This results in a negative effect on your credit score, and I always try to keep my score in great condition. First, I always shoot for a retention bonus, then downgrading to a “no annual fee” card, second. Make sense?
With business cards, I almost always cancel. The credit history, average age of account, and credit limit aren’t tied to my personal credit score. That means canceling a business card won’t hurt my credit score by shortening my average age of account.
I never cancel a Chase card outright, but prefer to only cancel a Chase card during the reconsideration phone call. I use it as a bargaining chip if I have to, in order to open a new card.
Here’s my hero post on “when and how to cancel rewards cards.”
Now that we have that settled, lets talk about the cards I do pay annual fees on. I will cheerfully pay an annual fee on cards with perks that justify it. I love me some perks.
I’m looking for status, annual certificates, certain category bonuses, no foreign transaction fee, spending bonuses, free checked bags, lounge passes, and other perks. I want it all. Basically, anything that would normally cost me money if I didn’t have the card.
Here are the cards that are currently in my (or Jordan’s) wallet that I’m paying to keep:
You all know I’m a Hyatt loyalist, so it makes sense that I keep their card. The annual fee is $75, but the Visa card comes with a free annual certificate at a category 1-4 hotel (think Andaz West Hollywood). That alone is worth the fee, but you also get Platinum status with Hyatt for as long as you hold the card. My Diamond status runs out the end of February. Boo. I will still receive free Internet, late check-out, and expedited check-in.
The Priority Club card only has a $49 annual fee, and you will receive 1 free night certificate annually! I used my free night certificate at the Palazzo last year as a gift to Jordan’s brother for his birthday, winning myself the Best Brother-in-Law award. You will also receive Platinum status with Priority Club, which isn’t much. But, I was able to use my Platinum status with Priority Club for a Hyatt Diamond status match last year.
Another hotel card. Shocka. The Citi Hilton Reserve card has an annual fee of $95. Ouch. It’s worth every penny, though. The Reserve card comes with Hilton Gold status, which includes FREE breakfast, Internet, and possible room upgrade. Loving it. And since it’s easy to accumulate Hilton points, you will want some kind of status when you’re staying with them. I do, and if you spend $40,000 annually on your Reserve card, you will receive Hilton Diamond status. I’m probably not going to go after Diamond, but I will spend $10,000 on my Reserve card to receive a free weekend night! Thanks to Vanilla Reloads and Bluebird!
The “old,” “targeted,” “employee” US Airways card has an annual fee of $89. I don’t like that, but I do like receiving 10,000 Dividend Miles every anniversary date! I’ll gladly pay $89 for 10,000 Dividend Miles. Remember – the new US Airways Premier World MasterCard® doesn’t come with this perk.
The Ink cards each have an annual fee of $95, and we have four Ink cards in our household! I’m going to keep at least one Ink Plus and an Ink Bold in our household. There are just too many opportunities to earn 5x Ultimate Rewards points with these cards, and Ultimate Rewards points are the most valuable points out there. The 5x earning on Internet, office supplies, cable, and phone services make the Ink cards my favorite cards in my wallet.
“On the fence” cards…
The Chase Sapphire Preferred has an annual fee of $95. It’s a solid card, so between Jordan and I, we will probably keep at least one open. Having the Sapphire Preferred gives us 2x points on dining and travel. Plus, a 7% annual dividend on all miles earned. It does have it’s specific Ultimate Rewards shopping portal, so that’s something to think about. I ended up paying the annual fee last year on the Sapphire Preferred, but this year, I’ll downgrade it to the regular Sapphire. If you do this, make sure you have your points transferred into another Ultimate Rewards account first.
I just signed up for the “18-hour” 100,000 American Express Platinum card offer. I’m pumped, because I’ve been eyeing this card for a while, and I couldn’t resist when I saw the 100,000 offer. There is a hefty $495 fee, but this card is packed with perks & features. You will receive an annual $200 airline credit, Priority Pass Select lounge access, and lounge access with Delta, American Airlines, and US Airways.
We will see how the first year goes, but yeah, this card is on the “to-cancel-or-not” fence.
The annual fee on the United card is $95, but you will receive 2 free United Club passes annually, and free checked bags. Conundrum.
The annual fee is $69, but you do receive 3,000 Rapid Rewards on your anniversary date. I’ll probably pass, because my annual fees are starting to add up. But, it’s a close call!
The annual fee is $65, and I would gladly pay this fee on both cards if I was going for Elite status with Starwood. You will receive 5 nights and 2 stays towards your Elite status each year. That’s 10 nights and 4 stays if you have both cards! I usually cancel/downgrade my Amex cards 6-9 months after opening, so I can reset my application clock. Keep in mind, you have to wait 12 months after cancelation until you can apply again.
End this craziness…
Wow, I didn’t expect this post to be so long, but once I got in my sock drawer and started pulling out cards – I knew I was in for a few hours behind the computer. I know I’m leaving off some cards, because I don’t have them, so feel free to leave a comment down below if you pay an annual fee on a rewards card I didn’t mention.
I hope this helps you decide whether it’s worth it or not to pay an annual fee.
[I do receive a referral credit for some of the cards mentioned. Thanks for the support if you decide to apply through the blog!]
— Noob Master