I’m a credit card editor who hates annual fee cards

This may be a surprise, but I am a credit card editor and avoid it at the expense of cards with annual fees. I’ve been researching and writing all day long about some of the best credit cards today, but I’m not sure the benefits of premium cards are worth paying for the annual fee.

Premium cards offer perks that can easily justify costs, including travel and shopping credits, lounge access and many other benefits.

But it’s not for me.

I don’t travel often and I’m not a large Spender so the card that doesn’t once a year always seemed to suit my lifestyle. What’s more, why add to the stress of annual fees when you can earn rewards with little or no effort?

My colleagues, credit card experts, authors Ryan FlaniganI deeply disagree. He squeezes a ton of value from expensive cards and holds over 50 cards for annual fees. For me, the higher the annual fee, the more money I waste. For Ryan, the higher the annual fee, the more valuable it is in return.

Ryan wants to convince me that annual cooking cards deserve to be in my wallet. Check out why I’m so resistant and why so many reward credit card fans think Paying annual fees is almost always worth it And how to compare cards with or without an annual fee to make sure they make the most sense to you.

I was always taught to avoid charges

When I grew up in the 1980s, credit cards were gaining traction. I remember being fascinated by the strange and clunky gimmicks that Reshiert uses to replicate credit cards with receipt slips. For them, credit cards were an emergency cash alternative.

As immigrants who came to the US in the 1970s, their only financial goal was to save money and avoid unnecessary costs. Therefore, pay a credit card fee when you don’t need to look frivolous and luxurious.

Ryan admits that at that point my parents’ perspective makes sense to immigrants, but he highlights how many cards have changed since. As Ryan sees, credit cards have evolved from emergency use alone to an effective way to earn passive income.

“Look like a credit card, just like an investment. Credit cards can create powerful passive returns in your daily life that can supplement your income,” he says. “Today’s cards offer exponentially more in terms of rewards and profits, so using them makes more sense than ever.”

That’s true: I’m not in the same position as my parents were in the 1980s. I use my credit card every day and earn money for my spending.

Still, I can’t shake off my parents’ perspective. Be aware of the additional costs, especially if they are easily avoided.

I don’t use the perks

Cards with higher annual fees often have plenty of perks to help justify the cost.

For example, many cards offer Uber, Dashpass, or Lyft statement credits, saving you hundreds of them each year. Best Travel Card It also boasts impressive travel-centric perks, including annual flight and hotel credits, free lounge access from TSA Precheck, or statement credits.

However, I have not used food delivery services for over six months, but I rarely fly enough to take advantage of the most valuable travel perks.

When deciding whether an annual fee card is right for you, it is important to know whether you want to use the benefits of the card. I don’t take advantage of many of these perks, so it’s difficult to justify paying them an annual fee. And if I have to change my routine or travel habits, wouldn’t the card perks be even more inconvenient?

Ryan agrees that the cards must be tailored to their needs to earn annual fees. “If the card doesn’t meet my lifestyle and value standards, I won’t keep its place in my portfolio.”

I always associate perks, especially travel perks, with premium cards, so not taking advantage of them seems like a waste. However, I simply don’t want to force them to use the perks to justify the annual fee. If you have to change your routine or travel habits, wouldn’t the card perks be even more inconvenient?

However, he points out that premium cards are not the only way to provide value. Reward cards with low annual fees may offer “extra large reward rates” that easily justify costs.

“You have to be smart with your annual pay card, just like every aspect of your personal finances,” he says. “Don’t block the possibility of a robust return without taking it into consideration.”

However, to make the most of the higher reward rates, you need to boost your spending. And that makes me nervous.

It doesn’t cost enough to offset the fee

Another factor in choosing a premium card and no annual fee is that you can offset the fee through rewards None Change your spending habits. If your card’s bonus category matches your spending, a high reward rate is more than making up for the higher annual fee.

However, with a yearly salary card, offsetting costs is not an issue. I can spend as much as I want.

I’m worried that if I have a card with an annual fee, I’m worried. I want to spend too much just to get the value of my money or make sure I’m spending it on unconventional categories.

for example, Chase SapphirePreferred® Card The top rate of the card is 5x points on trips booked with Chae Travel^smhowever, that category is not suitable for me as a rare traveler. Instead, my best chance to offset the fee comes from three times the points on the meals on the card, but even at that rate it would be hard to make enough to make the annual fee worth it.

Spending $1,000 on food purchases with Sapphire Preferred earned $30 cashback (three times the points on a redemption value of 1 cent per cent). However, you will need to earn an additional $65 reward just to offset the $95 fee.

In contrast, year after year City Custom Cash® Card Earn 5% for the first $500 spent on top eligible bonus categories for each billing cycle. If your top spending category was meals, then a $1,000 spend on a single billing cycle earns $50 in City Custom Cash.

Another way to see it: A $3,175 cost for meals with a Sapphire Priority Card will earn you a cashback of $95.25, which is enough to offset your annual fee. The same spending in a single billing cycle with custom cash increases cashback of $51.75 ($500 earns 5% and the remaining $2,675 earns 1%).

Ryan agrees that it is important Find out your budget And before you can determine whether an annual fee card makes sense, spending habits. But as he reminded me, “Premium cards can offer more value overall, as people often spend more on everyday expenses than they think.”

Still, I can’t help but think it’s easy to manage a card for a once-a-year salary because there’s nothing to offset. There’s less hassle and less worry.

I miss the detailed print

What to consider when evaluating a card with annual fees is that even if you want to use the card perks, can you jump over all the hoops?

Something like annual hotel credits may have strings, such as power outage dates and other restrictions on fine printing. Some perk offers have also expired. In addition, issuers can change the benefits of the card. Lounge Access,anytime. There is no guarantee that perks will help offset fees over the long term.

For example, if Chase Sapphire is preferred, you can get a free 12-month dash pass, but the offer is expected to end on December 31, 2027. If the offer has not been extended at that time, you will need to reevaluate the card’s value and cost.

However, Ryan assures me that fine printing of cards is not that complicated. “Most statement credits are easy to use,” he says. “Or you can look at cards that are difficult to understand. Not every card has a laundry list to consider.”

Ryan adds that there are restrictions such as annual fees and that he may come back to chew you as much as you do with the annual fees.

“The (issuer) is not paying fees and is working hard to limit losses, so we insist that we find more “gotchas” for fees that span year by year,” Ryan says. “Using an annual fee card makes it more reliable in my book, as I’m basically paying for more sustainable and robust privileges.”

My counter: I might have to consider Expense cap And other fine prints of yearly unpaid cards, but their value is not heavily dependent on perks. Limitations and changes may have minimal impact on the overall quality of your annual fee card.

How to compare cards with or without annual fees

If you are trying to decide between a premium card and a free card for each year, you can consider these features in the comparison shop.

• Welcome offer: Most reward cards, even annual fees offer sign-up bonuses and intro APR offers. Unless you use it too much, a welcome card offer can be a critical factor.
• Bonus Categories: To maximize your revenue, choose the cards with the bonus categories you spend most, such as travel, gasoline, and groceries.
• Remuneration rate: Think about how much you earn from your regular spending on your card.
• April: You must always pay your balance perfectly, but if you need to pay the minimum amount at emergency costs, you can make a decent interest card useful.
• Additional perks/benefits: Make sure you use the card benefits and perks, especially if they help offset the annual fees on your card.

My argument with Ryan shows the potential value of a premium card, but only if you choose the correct card. If you’re like me, even if you could get more value from a premium card on paper, the yearly salary card might be more suited to your lifestyle.

To demonstrate the value, advantages and disadvantages of both card types, Ryan compared the two Capital One Travel Card With a venture family. Find out how much you can expect to earn based on data on average annual spending, based on the Bureau of Labor Statistics 2023 data. From these figures, I estimated billable spending (i.e., most likely to be made on a credit card) at $22,500. To determine the revenue for the compensation, we assumed the average annual spending and base compensation value for the bank rate. Card Value Evaluation Methodology. Finally, we analyzed how the value of the cards stacks.

As you can see, Capital One Venture X has a relatively high annual fee, but only two annual bonuses ($300 travel credits and a 10,000 miles anniversary bonus, $100 worth of Capital One Travel) offset this expense without requiring any spending to earn a reward.

Venture X is one of the best cards with annual credits, and according to Ryan, as long as you can use these perks by booking a 10,000-mile reward trip and spending your travel credits, you’ll come out first without spending another cent. It goes without saying that other valuable features of the card, such as its high reward rates and priority pass selection membership.

By taking advantage of Venture X perks, you can easily see that despite the high annual fees, it is generally much more valuable.

However, if you don’t use these perks and not “Junkie” rewards, we estimate that after subtracting the annual fee, you will only get a reward value of about $125. Occasional travelers (like me) who may not be able to fly once a year may prefer the streamlined, unpaid version.

According to Ryan, this same logic applies to most comparisons of annual fee cards and their unpaid counterparts. Think about your spending habits and whether you’ll use card perks or earn enough money to earn enough money from your rewards.

Conclusion: Do I agree?

Yes, no. Whether or not it makes sense to get a card with an annual fee depends on many factors, including your personal style and preferences, but I will admit. Ryan makes great cases.

It’s difficult to discuss with him there. It might be worth the leap unless the card changes my routine or spends too much to offset my annual fees. And, as Ryan advises, if it doesn’t suit my needs anymore, I can always downgrade my card.

I’ll probably last for a while on my cozy yearly pay card, but my parents never taught me to waste my money, but they taught me not to give me much!

Ryan Flanigan provided additional reports for this article.