In the miles and points world, we often recommend readers about the best tips and tricks to maximize and improve their travel experiences. Readers love signing up for the best credit card offers. They help jump start travel plans by providing a large chunk of miles in the form of sign-up bonuses. However, hefty annual fees also accompany many of these tempting credit card offers.

Credit Card Annual Fees

Credit card annual fees often receive a lot of attention. The Chase Sapphire Reserve card generated a huge amount of buzz when it initially launched with a 100,000 points offer. We’ve seen steady increases in annual fees for card like the American Express Platinum Card, The American Express Gold Card as well as the business version of the Platinum Card.

While these increases in annual fees have come in along with an addition of benefits, are these cards still really worth it? How should we really be viewing annual fees?

An annual fee is an amount that gets charged once each year on your credit card statement. Think about this like a membership fee for a sports club or any professional association. Irrespective of how many benefits you derive your membership, you still have to pay that fee.

Most issuers charge the annual fee on the very first statement that closes after you sign up for the card.

Justifying the Annual Fee

Credit card reviews often talk about the benefits and how you can maximize the annual fee that you’re paying. This is largely true. However, many people make the mistake about thinking that benefits actually discount your annual fee. They don’t. These are essentially rebate programs.

For example, you pay the $250 annual fee on the American Express Gold Card. You use the $100 airline fee credit and the monthly dining credit totaling to $120 ($10 x 12). What this means is that you’ve redeemed $220 out of the $250 you spent on the annual fee.

Effective Annual Fees

Net annual fee or effective annual fee is a commonly used term to talk about how these rebate programs help reduce your travel costs. I think this term is both useful as well as misleading. Let me explain.

It’s correct to use this term in a scenario where I’m not drastically changing my behavior as a customer. Continuing with the example about the American Express Gold Card, the annual fee is justified if I’m using the airline fee credit benefit for an airline that I’d fly even if I didn’t have the card. Also, the dining credit would only be justified if I were already eating at the restaurants before I had the card. Card issuers make a lot of money via co-brand partnerships. These credits or rebates are designed to influence your behavior and make you switch from brand A to brand B.

It’s incorrect to use the term in a scenario where I’m going out of the way to earn back the money I’ve paid out in annual fees. For example, when I was residing outside the US, I found no sense to hold the American Express Platinum card as the airline fee credit benefit was worthless for non-US airlines.

The Pundit’s Mantra

a body of water with clouds and mountains in the background

Attain your travel goal by picking the correct card

Many issuers have made modifications to their products and offered temporary benefits in light of the Covid-19 pandemic and its effects on travel. However, does it still make sense to hold on to premium credit cards that charge hefty annual fees over $500, especially with no signs of normalcy returning to the world of travel any time soon?

All said and done, annual fees are an amount you owe to the bank no matter what. I always recommend aligning your travel goals smartly with the credit card that you want to sign up for.

It’s always prudent to look at the annual fee as an actual expense and then map out how the benefits stack up in comparison to the annual fee. No matter how the benefits, but if they’re making you go out of your way to change your consumer behavior drastically, then they may not be worth the effort.

What do you think about paying hefty annual fees and how they change your behavior or make you switch brands? Do you think they’re really worth it? Have you downgraded or canceled a premium credit card in the last 6 months? Tell us in the comments section.


The Points Pundit loves these newly relaunched Chase credit cards!

Firstly, they offer you a 0% APR for the first 15 months.

Secondly, they have no annual fee and have a lucrative welcome bonus of $200 or 20,000 Ultimate Rewards points after you spend $500 in the first 3 months.

Moreover, you can earn an additional 60,000 Ultimate Rewards points by simply using your card for spend in bonus categories!

They’re packed with brand new benefits and bonus points categories.

Overall, a great option to carry in your wallet for everyday spend!

Apply Now

(Chase’s 5/24 rule may apply to these cards)


Never miss out on the deals, analysis, news and travel industry trends. Like us on Facebook, follow us on Instagram and Twitter  and get the latest content!


Disclosure: The Points Pundit receives NO compensation from credit card affiliate partnerships. Support the blog by applying for a card through my personal referral links. This article is meant for information purposes only and doesn’t constitute personal finance, health or investment advice. Please consult a licensed professional for advice pertaining to your situation.