Many credit cards today come with annual fees, which some cardholders find worth the cost.
However, I personally do not see the value in annual-fee cards. Premium cards offer perks like travel credits and lounge access, but since I don’t travel often or spend a lot, a no-annual-fee card suits me better. I have yet to find a rewards card that justifies paying an annual fee, despite my expertise in credit cards.
My colleague, Ryan, disagrees with me and believes that the benefits of annual-fee cards outweigh the cost. He owns over 50 cards with annual fees and sees them as a valuable investment. For me, the idea of paying a high annual fee feels like a waste of money, while for Ryan, it means getting more value in return.
Despite Ryan’s arguments, I remain resistant to the idea of annual-fee cards. I was raised to avoid unnecessary fees, and the concept of paying for credit card perks still feels extravagant to me. Ryan, on the other hand, sees credit cards as a way to earn passive income and maximize rewards.
One reason I avoid annual-fee cards is that I don’t believe I would utilize the perks they offer. Cards with high annual fees often come with benefits like statement credits for travel or dining, which I rarely take advantage of. For me, the best card is one that requires minimal effort to earn rewards.
Ryan agrees that a card should align with your lifestyle to justify the annual fee. If the perks don’t match your needs, it may not be worth paying for them. While I associate premium cards with travel perks, Ryan emphasizes that rewards cards can offer value beyond just travel benefits.
Another consideration in choosing a card with an annual fee is whether you can offset the cost through rewards without changing your spending habits. If the bonus categories align with your expenses, a high rewards rate can make up for the annual fee. However, with a no-annual-fee card, this is not a concern.
I have the freedom to spend as much or as little as I want and still come out ahead with rewards. But, I fear that having a card with an annual fee might tempt me to overspend just to justify the fee or spend in categories I don’t typically use. For example, the Chase Sapphire Preferred card offers 5X points on travel, which doesn’t align with my spending habits. Even if I earn 3X points on dining, it might be challenging to accumulate enough rewards to make the annual fee worthwhile.
On the other hand, a no-annual-fee card like the Citi Custom Cash® Card provides 5% cash back on the first $500 spent in your top eligible bonus category each billing cycle, without any fee to offset. This simplicity makes it easier to manage and less worrisome. When comparing spending scenarios, a $1,000 dining purchase with the Sapphire Preferred would only earn $30 cash back, barely enough to offset the $95 annual fee. In contrast, the same spend with the Custom Cash card would yield about $52 in cash back.
While premium cards may offer more value overall, it’s crucial to assess your budget and spending habits before deciding on an annual-fee card. Fine print details, such as limitations on perks like annual hotel credits or expiration dates on offers, can impact the card’s value. In comparison, no-annual-fee cards may have restrictions like spending caps but are generally easier to manage without the need to offset a fee.
When comparing cards with and without annual fees, it’s important to consider the potential rewards, perks, and drawbacks of each. For example, the Capital One Venture X Rewards Credit Card offers substantial perks like a $300 travel credit and a 10,000-mile anniversary bonus, which offset its high annual fee. However, if these perks are not utilized, the card may not provide as much value as a no-annual-fee option like the Capital One VentureOne Rewards Credit Card.
In conclusion, while annual-fee cards can offer significant benefits, choosing the right one that aligns with your spending habits and lifestyle is key. No-annual-fee cards may provide simplicity and ease of management without the need to offset a fee, making them a preferred choice for some individuals.
Assessing Your Spending Habits for Card Perks and Rewards
When considering whether a credit card with an annual fee is worth it, it’s important to evaluate your spending habits and determine if you will utilize the card’s perks or earn enough rewards to offset the fee.
Final Thoughts: Am I Convinced?
After weighing the factors, the decision to get a card with an annual fee is a personal one. Ryan presents a compelling argument in favor of maximizing returns on spending if you are already making those purchases. It’s a valid point to consider.
“If you have to spend the money anyway, you might as well help yourself by getting the maximum return on your spending.”
— Ryan Flanigan
Writer, Credit Cards
It’s hard to dispute the logic behind this approach. As long as the card aligns with your lifestyle and doesn’t encourage overspending to justify the fee, it could be a worthwhile investment. And if the card no longer meets your needs, as Ryan suggests, you can always downgrade.
While I may stick with my current no-annual-fee cards for now, the idea of not missing out on valuable rewards is compelling. It’s all about finding a balance between saving money and seizing opportunities.
Ryan Flanigan contributed additional reporting to this piece.