Should I Apply for a Credit Card With an Annual Fee?

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There are many travelers who simply refuse to pay an annual fee to use their credit card. Their reasoning is that there are many cards offered that have no annual fee, so why pay when you can get a credit card for free? However, this logic fails to consider the value that travel rewards cards can offer, which can far exceed the cost of the credit card’s annual fee.

Travel rewards cards without an annual fee

There are still some travel rewards cards that don’t have an annual fee, and these products aren’t particularly competitive. For example, the Bank of America® Travel Rewards credit card offers you an unlimited 1.5 points per dollar spent, and each point is worth one cent when redeemed for statement credits towards flights, hotels, vacation packages, cruises, rental cars, or baggage fees. Citi’s ThankYou® Preferred card offers 2x points  for dining and entertainment purchases, and one point per dollar spent elsewhere. Points are worth one cent each towards gift cards, merchandise and travel reservations.

But unfortunately, these cards don’t let you transfer your points to frequent flyer miles for great values like last minute reservations or international flights in business or first class (the Citi ThankYou® Preferred Card only lets you transfer points to JetBlue’s TrueBlue® program only, and at just a 2:1 ratio). This means that a typical $5,000 round-trip, business class ticket to Europe will cost 500,000 credit card rewards points, as opposed to the 100,000 – 120,000 frequent flyer miles charged by many airlines.

Credit cards with annual fees that are easy to justify

The Blue Delta SkyMiles® Credit Card from American Express has no annual fee but offers very few perks, mostly just a 20% savings on in-flight purchases of food, beverages, and audio headsets. In contrast, both the personal version and the Platinum Delta SkyMiles® Business Credit Card from American Express offer an annual companion certificate good for a domestic, economy class, round-trip ticket in the contiguous 48 states. By itself, this certificate can be worth hundreds of dollars. The Platinum SkyMiles card also offers your first bag checked for free along with priority boarding and discounted Delta Sky Club access. You also have the chance to earn up to 20,000 Medallion Qualifying Miles each year though the Miles Boost program. Reaching the next level of Medallion status can help you be upgraded more often while saving money on fees. There’s a $195 annual fee for this card.

Another example is the Hilton Honors American Express Card, which has no annual fee. It offers Silver status and 7x points at Hilton hotels, 5x points at US restaurants, supermarkets and gas stations and 3x points elsewhere. However, the Hilton Honors American Express Ascend Card features Gold status and 12x points at Hilton hotels, 6x points at US restaurants, supermarkets and gas stations and 3x points elsewhere. It also includes a weekend night rewards when you spend $15,000 on your card in a calendar year, and 10 free Priority Pass Select visits. There’s a $95 annual fee for this card.

When you look at the rewards and benefits available for cards with a reasonable annual fee, that you don’t get on the no-fee version, you’ll find that it’s often worth it to pay a little to get a lot in return.

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