I spend $1,000 per year in annual fees on credit cards I don’t use…

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I’ll admit that I spend well over $1,000 per year in credit card annual fees. Now, before you call me nuts, hear me out, because there’s an important distinction to be made.

I’m not spending most of that annual fee money in order to maximize category bonuses (like double points on dining, travel, gas, groceries, etc.), but rather am paying those fees for the annual benefits that come with a credit card. For example, here are the cards I’m gladly putting in my sock drawer and paying the annual fee on, without the intention of necessarily spending much money on them:

Starwood Preferred Guest® Credit Card from American Express
Annual fee: $0 introductory annual fee for the first year, then $65
Reason I pay it: It gets me two elite stays and five elite nights towards Starwood Platinum status annually, which are nights I’d probably otherwise mattress run for.

Starwood Preferred Guest® Business Card from American Express
Annual fee: $0 introductory annual fee for the first year, then $65
Reason I pay it: It gets me two elite stays and five elite nights towards Starwood Platinum status annually, which are nights I’d probably otherwise mattress run for.

Citi® Hilton HHonors™ Reserve Card
Annual fee: $95
Reason I pay it: It gets me Hilton HHonors Gold status for as long as I have the card, which comes with free breakfast and internet.

Chase Hyatt Visa Card
Annual fee: $75
Reason I pay it: It gets me an annual free night certificate good for any category 1-4 property, like the Andaz West Hollywood or Hyatt 48 Lex New York.

Chase Priority Club Visa Card
Annual fee: $49 (waived the first year)
Reason I pay it: It gets me an annual free night certificate good for any Priority Club property

The Platinum Card® from American Express
Annual fee: $450
Reason I pay it: It gets me a $200 annual fee credit ($400 the first year, as discussed here) which can be used to purchase airline gift cards, gets me lounge access which I’d otherwise pay for, and gets me access to Fine Hotels & Resorts.

The US Airways® Premier World MasterCard®
Annual fee: $89
Reason I pay it: It gets me an anniversary bonus of 10,000 Dividend Miles annually.

Citi® / AAdvantage® Platinum Select® MasterCard®
Annual fee: $95 (waived the first year)
Reason I pay it: As discussed here, gets me a 10% rebate on award redemptions, up to 10,000 miles per year.

Now, I do try to get retention bonuses on these cards whenever possible (meaning when the cards are up for renewal I’ll give them a call and see if there’s any bone they can throw my way), but many times they don’t offer anything.

So am I crazy? I think not. For the ~$1,000 in annual fees listed above (not even factoring in retention bonuses) I’m getting 20,000 miles, a $200 airline fee credit, one of the most comprehensive lounge memberships out there, mid-tier status with Hilton, four stays and 10 nights towards elite status with Starwood, and two annual free night certificates for hotel stays.

And despite all that, I think I’m getting a great deal. Here’s where I think people go wrong with credit card annual fees. Lots of people will pay the annual fees on cards to maximize category bonuses, and in many cases that makes sense. But I don’t think enough people crunch the numbers on how much they have to spend to justify an annual fee before they come out ahead. Now there are some cards that are an absolute no brainer, though let me give an example of one that isn’t.

The American Express® Premier Rewards Gold Card is the most rewarding card which accrues Membership Rewards points. I’ve had the card for several years now, and paid the annual fee without thinking twice about it. The card accrues points quickly — triple points on airfare and double points on gas and groceries. That’s extremely rewarding if you spend a lot of money on airfare, gas, and groceries.

While the annual fee is waived the first year, it’s a steep $175 per year thereafter. I value Membership Rewards points at 1.6 cents each, so that means to break even I’d have to earn ~11,000 Membership Rewards points worth of “value” beyond the next best option.

For me there are a couple of cards that I’d argue are an extremely good value for just about everyone — the Chase Sapphire Preferred® Card and Ink Plus® Business Credit Card / Ink Bold® Business Charge Card (see this post for the differences between the Ink Plus and Ink Bold cards). The Chase Sapphire Preferred earns me 2 points per dollar spent on airfare (double points), and I value Ultimate Rewards points at 1.9 cents each. That means with the Chase Sapphire Preferred I’m earning roughly 4% of “value” back on airfare spend, while on the Premier Rewards Gold card I’m earning 4.80% of “value” back on airfare spend.

On gas I earned double points using the Premier Rewards Gold card, though also earn double points on gas using the Ink Bold® Business Charge Card, which accrues Ultimate Rewards points that I value higher than Membership Rewards points.

And that leaves groceries, where the next best alternative for me would be the Starwood American Express, which earns me one Starpoint per dollar spent. I value Starpoints at 2.2 cents each., compared to the 3.2% return I get on the Premier Rewards Gold Card due to earning double points.

So is a $175 annual fee worth a marginal return of 1% on groceries and ~0.75%? In my case it definitely wasn’t, so I’ll be canceling the Premier Rewards Gold card when the annual fee comes due again. Don’t get me wrong, I think it’s a great card and it’s worth it at least for the first year given the waived annual fee and sign-up bonus, but the math on the annual fee doesn’t add up for me beyond that.

So what I’m trying to say is that I think we shouldn’t be scared to pay annual fees… but more so for the annual benefits than the category bonuses, with some exceptions which I’ll cover in a future post.

About lucky

Ben Schlappig (aka Lucky) is a travel consultant, blogger, and avid points collector. He travels about 400,000 miles a year, primarily using miles and points to fund his first class experiences. He chronicles his adventures, along with industry news, here at One Mile At A Time.

More articles by lucky »

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Comments

  1. Thanks, this post is really helpful to see what value you get out of each card without any spend. There is so much talk of spend bonuses and bonus categories and point valuation so it is nice to see what each card does for you if it just sits in a drawer. :)

    I am starting to agree with you on my Premier Rewards Gold AmEx. However, I like that they are a transfer partner to Singapore Airlines (Suites Class) among others that Ultimate Rewards is not. Also, I have a large balance of membership reward points I don’t want to transfer out just yet. So, I get to eat the $175 fee again (this month actually). Any tips on getting it reduced/bonus points from AmEx?

  2. Don’t forget Hilton Surpass Amex, which gives you access to AXON awards and 6X at grocery and drug stores (like CVS). Although we’re SPG Plat people, we are Hilton Diamond through Surpass spending of 40K “annually” (have received Diamond for 2 years twice, so we really only have to do the 40K every other year). Have been able to book 25 free nights at Hiltons this year in Koh Samui, Maldives, Pattaya, Rome and Venice, thanks to the card.

  3. You might want to add a no-fee card to your arsenal – the Hilton Amex – which gives six points per dollar on groceries, gas, drug stores, and more, I value Hilton points at .6 cents per dollar (other estimates range from .5 to .8), so a $100 grocery bill would give you, in my calculations, $3,60 worth of points. The card also gives you access to AXON awards (145,000 points for a top 4 night Cat 7 hotel, which saved me tons of money in London at the Hilton Trafalgar.

  4. Just wondering – does spending in foreign currency in the same categories (eg. Groceries outside the USA) also earn the bonus multipliers?

  5. New platinum card holder. Can you tell how to use those funds for gift cards on Inez’s selected airline? I am currently linked to delta…

  6. Great post! Like PatMike I recently signed up for the Hilton Surpass Amex for not only the grocery/drugstore benefits but also for the 12X bonus points for hotel spend. I already have quite a few Hilton stays booked for the coming year so I chose this as a point maximizing option. That said, once my first year of complimentary Gold expires, I’ll likely go for the Citi Reserve card so I can “lock in” my Gold status.

  7. Can you rotate between the 3 Amex plat. cards (biz/personal/MB) and save the fee?

    I think some Chase cards have their own version of FHR, but with a little less of a benefit – but the cost is less too.

    Also, if you use a Virtuoso travel agent, they can get many of the same upgrades/breakfast benefits as FHR I believe.

  8. @ Patrick Mc — Thanks! It’s definitely something I struggle with, simply because when you’re accruing points it’s not just about how valuable they are, but also about how well diversified they are. And the fact is that the Premier Rewards Gold card is the best one for racking up Membership Rewards points. Right now I’m more focused on collecting Membership Rewards points through sign-up bonuses and promotions, which seem to work just as well.

    @ PatMike — Since I prefer the Citi Hilton Reserve to the Surpass (due to the free night after $10K of spend and no foreign transaction fees), I actually prefer the no annual fee AmEx Hilton card.

    @ PSL — Yep, have that card as well. To clarify, the above isn’t the extent of my credit card “collection,” just the ones I pay annual fees on that I consider worthwhile for the benefits alone.

    @ Sean M. — Depends on the card, in my experience. For example, with the Premier Rewards Gold card you earn double points only at US gas stations, while with the Chase Sapphire Preferred you earn double points on travel everywhere.

    @ Margit — This post has more info on making reimbursable purchases: http://onemileatatime.boardingarea.com/2012/11/05/reminder-now-is-a-great-time-to-sign-up-for-a-credit-card-with-an-annual-airline-fee-credit/

    I’d suggest checking out this thread for experiences with Delta:
    http://www.flyertalk.com/forum/american-express-membership-rewards/1300461-200-airline-fee-reimbursement-reports-dl-only.html

  9. Nice post. I upgraded my Amex Gold to Platinum when I got the Sapphire. That combo is pretty unbeatable, and I imagine Amex will release a new “in between” card that will have the category bonuses that the Gold has with some of the higher end benefits of the Platinum (at least that is the feeling I get when I talk to employees there). So instead of having two gold cards (which doesn’t make sense to me), they’ll have a gold, a new (ruby, titanium, etc.) card, and then the platinum. Maybe it will have category bonuses and airline lounge access, but no the villa, private jet, and fine hotels that the Platinum has.

  10. @ Lawrence — Virtuoso benefits are in many cases similar, though I like having the flexibility. Some hotels belong to Fine Hotels & Resorts and not Virtuoso, and the amenities usually differ between the two, so it’s nice to be able to pick and choose.

    You can rotate between those cards, though keep in mind you’re paying the annual fee, as it’s not waived the first year. The benefit would be that you get two years worth of the airline fee credit.

  11. @ Craig — Thanks! Funny enough I was going to propose this idea. Call it the “Premier Rewards Platinum card,” heck, even slap the two annual fees together, and make it one card with the earning potential of the Premier Rewards Gold card and benefits of the Platinum card.

    @ Grant — Nice card too, though I’m trying to take it easy with Chase cards, since I have quite a few of their cards beyond the ones listed here.

  12. How about the Chase Ink? how do you collect UR points? I saved this post so I can remember why certain cards are worth keeping when annual renewal comes up.

  13. For we lowly non-elites, even perks like low-level status (Hyatt Visa) or free checked bags (Citi AA, Chase United) can be worth the annual fees.

  14. Before you cancel Amex PRG give their retention folks a call. They offered me $130 immediate credit and additional $75 credit with $3000 spend in 60 days. So they paid me $30 to carry the card 1 more year.

  15. @ EGWG — I think those free nights are valuable, but I’m not really in a position to have any more “permanent” Chase cards (as I’m cycling them in and out right now), and since I’m not a Marriott guy they’re not my priority.

    @ Mariana — To be clear, the cards I list above are all ones I keep just for the benefits. The Chase Ink Bold I keep for the spend ability, and it’s phenomenal. Between it and the Chase Sapphire Preferred I earn a ton of Ultimate Rewards points.

  16. @ Chris S. — Great point.

    @ pssteve — Will definitely do that, as I’m sure their retention department is pretty generous given the fact that they’re not giving you some annual free night or anything.

  17. @lucky – if you rotated between the 3 amex cards, you still pay the annual fee (i forgot it wasn’t waived the 1st year) but couldn’t you get the signup bonus? That’s not insignificant…

  18. @ James — That would be news to me.

    @ Mileage Update — Often times they’ll waive it, offer a statement credit, or offer some points. It all seems to come down to the agent you get, how much you’ve spent on the card, etc., so experiences really do vary.

    @ Lawrence — Right, you could indeed.

  19. Discover Card has some fantastic perks for new accounts right now. They are giving you $100 if you charge $500 within three months. That’s just crazy. Even if you only charge $1, you will still get $50 cash back.

    The catch is you need a referral from an existing customer, but this direct link to their site should get you both bonuses: http://tinyurl.com/cjth4dv

  20. You’re only nuts if all the benefits (miles, free rooms, upgrades, etc) are less than $1,000 combined.

    Out of curiosity, Lucky, what do you value the “profit” you get from these cards?

  21. Quick clarification question. For the priority club free night annual certificate, I assume that it would be valid at Intercontinentals but just wanted to verify that. In which case I understand why you would keep the card for $49 each year. thanks

  22. @ wwk5d — From these particular cards? It’s tough to say. My cost-benefit analysis isn’t especially complex when it comes to frequent flyer miles. If the card provides more value than the cost, I keep it. If it doesn’t I don’t.

    It’s especially tough to quantify the value of something like two elite stays and five elite nights with Starwood. If you have 100 nights and 100 stays in a year they’re worth zero, while if you end the year with 23 stays and 45 nights, they’re worth the cost of two mattress runs at a minimum.

  23. Wait a minute, you buy groceries? I thought all your meals were on airplanes and lounges =)
    Great post though, as I was recently thinking about this topic.

  24. Actually, by profit, I meant how much is the rough estimate if you had to pay for those things with cash rather than redeeming them via the cards? Posting that value(like, say, it would cost $3,000) might make you spending that $1,000 seem less nuts ;)

  25. I have the AMEX Biz Gold Rewards and agree that it’s not as valuable as it seems. I’m thinking of taking AMEX up on an offer to upgrade to the Biz Platinum (I already have a personal plat.) for a bonus of 25K, then use the $200 airline credit and close the account, for a net bonus of 25K points for $250 (.01 per MR point is pretty good). I’d close the account before the annual fee posts, but AMEX has a habit of posting the fee right away.

  26. @ wwk5d — And sorry if I wasn’t clear, but I’d have a really hard time estimating that. I don’t know what I’d value four elite qualifying stays and 10 elite qualifying nights with Starwood at, for example. This year I would have made it to 25 stays either way, though wouldn’t have made it to 50 nights. Making it to 50 nights gets me 10 suite night awards, but I’m not sure how I’d actually value them.

    So for easy, conservative math let’s say the 20,000 miles are worth 1.5 cents each ($300), the two free nights are worth $200 each ($400), there’s the $200 airline fee credit ($200), I’d pay for an Admirals Club membership ($350).

    That’s $1,250 of value right there not factoring in the four elite qualifying stays and 10 elite qualifying nights, and Hilton Gold status.

  27. Do you place more value on hotel CC benefits that airline CC benefits? I noticed that you are holding a lot more hotel credit cards than you are airline ones.

  28. @ James — To clarify, the above cards aren’t all the ones I have, but rather just the ones that have annual fees and I don’t really use. The reason I have more hotel cards listed above is because they often have more annual benefits (like a free night), while airlines don’t have that as frequently. Instead I find airline cards often better for actual everyday spend.

  29. I’m interested in getting the SPG card, when I click on the SPG personal card I see the 25K offer, but when I log in I get:

    “We apologize that the offer you are looking for is no longer available.”

    Then they show me a card which only has 10K after initial spend. Just need to wait?

  30. Why do you have two starwoods? Once you get the sign-up bonuses,I don’t see a purpose. Acording to their website,it says,”You will not receive additional 2 stay or 5 night Elite status credits if you have multiple Card Accounts.”

  31. @ Nick — Just make sure you’re logged out of your AmEx account and cookies are cleared. Can you do that and try again? Should work at that point.

  32. I’d be surprised if you aren’t offered a retention bonus the majority of the time. Wife and I have got it for our Citi AA and Amex Premier Reward credit cards last two years. Now there are other factors involved that could cause them not to offer retention bonus but just about everytime we are offered something to stay.

  33. @ Joediver — Sorry, didn’t mean that I always leave the card in the drawer, but just that it’s a card that’s worth leaving in the drawer even if you don’t have another use. I do use my SPG AmEx for domestic Starwood stays (and my Chase Sapphire Preferred for international ones to avoid the foreign transaction fees).

  34. The best advice I got from FTULA was from another attendee. Call every card every year and tell them you are cxling. AmexPlat gave me $325 credit on the spot. Others gave me bonus miles (2x, 3x) per $ spend (to a limit). I think that one strategy and 10 calls is going to save me ~ $500 and get ~ 100-150k in miles..

  35. @ Jon — Because I end up going for Starwood Platinum status, so having Gold isn’t of much value for me.

  36. True, but wouldn’t that be a good starting point for Platinum? I just got the card and they matched me, so 10 stays gets me Platinum right? Maybe I’m missing something?

  37. @ Jon — While they give you Gold status they’re not actually giving you any elite qualifying stays/nights. For Platinum status you’d still need the full 25 stays/50 nights.

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