Hi there, it's Ernest from Trip Astute. In this video, we're discussing why it's
sometimes worth paying an annual fee on your credit card.
(light chiming music)
So I was having a conversation with some friends the other day, and the topic of credit cards came
up. One of my friends said, "why would anyone ever pay a fee to use a credit
card?" My response to her was that it was less about the cost, but instead, the
value that you get from a card. I decided to do a video on the topic since
it's one of those questions that I get asked all the time from folks who are
starting the points hobby, and are skeptical of whether they would benefit
from paying an annual fee on their credit card. In this video, I want to
share with you why I pay the annual fee on certain cards, and give you some
examples of cards with fees that I find extremely useful. Keep in mind that while
I may take advantage of certain card benefits, you may or may not find them to
be useful as well. Number one: Sign-up bonuses. Probably the biggest reason to
get a card with an annual fee is to get a large sign-up bonus. Card offers can
sometimes be worth over a thousand dollars if redeemed properly. Some examples
of large signup bonuses in the past are the American Express Platinum and
the Chase Sapphire Reserve. Even in July 2017, Chase is offering an 80,000 point
bonus on its Ink Business Preferred card and Citibank is offering a 75,000 point
bonus on the Prestige card. Number two: No foreign transaction fees. Most premium
cards with annual fees do not have a foreign transaction fee, which saves you
money while traveling abroad. Number three: Bonus categories / earning rates.
Cards with annual fees often reward you with bonus points at certain categories.
For more information, check out some of our other videos like the Chase 101 and
the Travel Rewards 101 video. Number four: Perks.
I won't go into all the perks available, as they differ with every card, and I've
covered them in some of the other videos. However, here's a quick list of some
popular perks that you'll often find on these cards.
Number five: Special offers. Some cards give you special offers, discounts, or
memberships to their users. For example, American Express offers some of it's
card members access to Shoprunner, which gives you free two-day shipping on many
shopping sites. It's like having Amazon Prime for other retail sites. Number six:
Annual bonuses. This is a huge reason to pay an annual fee. Many cards with an
annual fee give you a bonus every year. It can be a travel credit, free hotel
night, or points, depending on the card. As of July 2017, the cards I use with annual
fees includes the following list. The Chase Sapphire Reserve is an awesome
card for so many reasons already discussed in this video. It's my go-to
card for travel and dining expenses. Though the annual fee is $450,
I feel like I'm able to squeeze a lot of value out of the
card. If you factor in the annual $300 travel credit, the annual
fee is more like $150, which is only $55
more than the Sapphire Preferred. The Chase IHG Rewards Club Select is a card
that I don't really use, but pay the annual fee every year. Why? Because the
annual fee is only $49 and includes an increase in status level,
as well as an annual free night at an IHG brand hotel, such as the Intercontinental,
Hotel Indigo, Crowne Plaza, and Holiday Inn. I've easily been able to use the
free night every year for a luxurious hotel stay, so for me, it's completely
worth paying the annual fee. Also, I set a small reoccurring charge on it every
month to keep the account active. The Chase Hyatt Rewards card has a slightly
higher annual fee, but like the IHG card, gives me a free night and increased
status. I love the Hyatt portfolio of hotels, especially the Andaz brand. Paying
the annual fee of $75 make a lot of sense since a room is generally
double or triple that amount. The Chase United MileagePlus Explorer card has a
$95 annual fee. This is a card that I have contemplated canceling,
especially since I have lounge access through my Sapphire Reserve, and don't
usually use the free checked bags. I've decided to keep it though since I
usually end up taking advantage of the United lounge passes. Also, with the card,
I get access to additional reward booking availability through United,
which makes it easier to book a reward flight. The Club Carlson Premier Rewards
card is one that I am contemplating whether I want to keep. I get 40,000
points each year for keeping the card, but I haven't had many opportunities to
redeem the points. We're hoping to do a Europe trip later this year, so hopefully
I'll be able to take advantage of the points that I've accumulated over the
years, but I'm still in the fence on whether I want to keep this card. Also,
here are some tips for managing cards with annual fees. Number one: Set a
reminder to re-evaluate your card membership every year. It's important to
review whether you are getting the full value from your cards. Considering that
life changes all the time, it's good practice to reflect on your current and
future spending. I would suggest making a decision on
whether you want to keep your card around month ten of your anniversary. You
definitely want to make a decision prior to the annual fee being charged to your
account. Otherwise it can be difficult to get a refund on the fee. Number two:
Downgrade your card if necessary. If you decide that you're not going to be
benefitting from your card, then consider downgrading to a free version of your
card. Here are some examples of the conversions you can make on some of the
popular premium cards. I prefer downgrading than closing an account since
closing tends to have a more negative impact on your credit score. For example,
when I got the Chase Sapphire Reserve card, it was pretty clear that it was
going to replace my Sapphire Preferred card. So instead of canceling the
Sapphire Preferred, I converted it to the Freedom Unlimited card since it was one
of the cards that I wanted to get. I gave up the opening bonus on the Freedom
Unlimited card by choosing to convert my Sapphire Preferred,
rather than opening a new account. But the opening bonus for the Freedom
Unlimited was not very big and I plan to keep the card for the long term. Plus, I
avoided having the additional credit inquiry and the card did not apply to
Chase's 5/24 rule. Number three: Plan your card strategy. Like tip number
one, think about your long-term travel goals. Do you plan to travel in the
future? If so, what types of points are you looking to build, and are there
certain programs that might be better suited to meet your goals? Also, think
about your future daily spend. Are you planning to eat out as much? Or maybe you
anticipate more grocery spend. Will you be buying a house or car? All these
factors should shape your card strategy. Number four: Time bonus offers. This is
really important. Certain cards have seasonal bonuses, so it's worthwhile to
research to see whether it's a good time to apply for a certain card. What are your
thoughts on paying the annual fee on credit cards? Please share them in the
comment section below. Also, let us know if you have any
questions and consider subscribing to our channel. It's free, and you'll get
notifications on all our new updates. Lastly, in case you're wondering where I
am, we recently moved to a new location. In future videos, we'll be using our new
set, so we wanted to give you a quick preview. Until next time, travel safe
and travel smart.