One of the bits of advice consumers are often given about credit cards is to avoid those with annual fees – at all costs. After all, there are plenty of rewards programs out there being offered for free. What advantage comes with a credit card that charges an annual fee?
In some cases, though, annual fee credit cards can be worth the cost. It all depends on what you value, and what’s important to you. Plus, if the rewards program is generous enough, you can usually earn enough in rewards to offset the cost of the annual fee.
Earning More Rewards Points
With most “free” rewards programs, you have very basic methods of earning rewards points, and you often earn them at a slower pace. A credit card with an annual fee, though, might offer more generous bonus points when you spend a certain amount within a certain time period, or might offer anniversary points each year.
On top of that, many annual fee credit cards also feature faster ways to earn points, such as two points for each dollar, or even more generous terms. The Blue Cash Preferred Credit Card from American Express pays a $100 welcome bonus, plus 6% cash back on groceries and 3% cash back on gas.
If you want to earn more rewards points, and do it faster, it can be worth it to use a card with an annual fee – but only if you know you will use those rewards.
Perks Associated with Annual Fee Credit Cards
In addition to earning points faster, you might also be able to take advantage of various perks. Indeed, many cards with annual fees include special discounts on partner products, and sometimes even offer personal concierge services that can add convenience to your travels.
Other credit card perks might include access to a particular airline lounge, if you are using an airline branded miles card like the Southwest Credit Card, or an automatic upgrade to special status with certain hotel branded cards like Hilton HHonors credit cards.
These perks can mean increased comfort and upgrades while you travel. If you value this kind of access, then a card with a yearly fee can be worth the price you pay.
Don’t Carry a Balance
Of course, no matter how many points you earn, they can be rendered practically worthless if you offset them by paying high interest rates. Many rewards cards that include special perks also have slightly higher than average interest rates. If you carry a balance, you might be paying enough to offset what you earn – especially since there is an annual fee involved.
It’s important to have a regular spending plan if you want to get the most out of your rewards card. Use the card wisely, within your plan, and you could earn points quickly, enjoy comfort and perks, and easily offset the cost of the annual fee.