topic Re: Evaluating Annual Fee Cards in Credit Cards

Evaluating Annual Fee Cards

Aim_High — Tue, 11 Oct 2022 13:42:11 GMT

In another thread, @Janneman asked me about getting good value out of annual fee cards. My answer would take the original thread off-topic, but I also thought the information and discussion might better benefit the community in a separate thread topic.
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@Janneman wrote:
@Aim_High

I know you have many high AF cards...So, I am sure you must be paying a tons of money on those cards every year towards AF....Do you think you get even or more out of all these cards when it comes to how much you must be paying AF for all these cards?? I was thinking to get this CITI card but then changed the mind because I don't fly with AA....and/or AF doesn't justify in my case....

And that's the rub on these AF cards, @Janneman. They don't fit all consumers equally well. I don't get cards just for SUBs so I try to do my homework before applying. Keeping these cards is also tricky since the value one expects to receive may not materialize or it may change over time. There are AF cards that don't make sense for me either. For example, the AMEX Platinum is a fine card for some but it would be a wasteful hole in my pocket. I got the AMEX GOLD card to experiment with MRs two years ago but just decided to close it since the AF wasn't cost effective for me.

These cards are a lot more complex than no-AF cash back cards. Figuring out each one requires some analysis of a few factors relative to the AF:

CREDITS: Many of these cards give money back which results in a reduced "effective AF." For example, my Chase Sapphire Reserve gives $300 back on the first travel charges on the card after the AF posts. I usually get that back within one or two months. Likewise, my AMEX Bonvoy Brilliant has a $300 annual credit. My Bank of America Premium Rewards returns $100 in airline fees but the AF is only $95, resulting in a $5 profit to me when I use the credit. Another common credit is up to $100 towards TSA Global Entry or Precheck which are both very helpful for a more pleasant air travel experience.
PERKS: My hotel cards often give a "free" annual night. The value of those hotel stays in points are often worth many times the entire AF. Two examples on a recent trip: I used a World of Hyatt Category 4 hotel night at a Hyatt Regency property where room rates were $300 to $450 and they gave me an upgraded room due to my loyalty status I received through my card. (This is making me question my decision to close my Chase World of Hyatt card; the AF that got me that room was only $95.). Also, on the same trip, I used the 85K free night credit from my $450 (now $650) AF Bonvoy Brilliant card for a large-city premium room worth $700 to $850 if booked for cash. Hotel cards (which often earn high rewards per dollar spent at those properties) combined with enhanced loyalty status (often included on hotel cards without the normally required stays) also accelerate my points earning for in-hotel spending to use on future stays. Airport lounge access is another perk that may help offset AFs if that is something you would do anyway.
HIGH POINT VALUE: Hotel, airline, or travel points like Chase URs or AMEX MRs can be worth much more than the equivalent cash back values, but the specific value depends on how they are redeemed. Finding exceptional value for usage of points can help to lower the AF.
BENEFITS: Many of the premium AF cards offer insurances and protections that add to the overall value. The primary Rental Car CDW on my Chase Sapphire Reserve saves me from signing up for coverage through the rental car company and from exposing myself to a claim on my personal auto insurance policy. That is money in my pocket on every rental. CSR also includes Roadside Assistance that not only dispatches but also pays the first $50 on up to 4 annual calls, equivalent to a $55 annual fee AAA policy. My Chase Sapphire Reserve has some of the best travel protections in the industry for things like lost/delayed bags, trip delays/cancellations, Travel and Emergency Assistance, Travel Accident Insurance, and Medical Evacuation. My CSR and Marriott Bonvoy Brilliant offer expanded Extended Warranty coverage on shopping, Purchase Protection for stolen or damaged purchases, and Return Protections when a retailer won't accept returns. The value of any of these will be variable, of course, and everyone must decide for themselves how much they will need them or what the "peace of mind" value is in having them regardless of the AF. But sometimes, what you are paying for isn't a fixed monetary value.

So yes, I think the cards I have are making sense for me. At the same time, I appreciate how my situation may be different and the cards I value may not work well for your needs, spend, and life style. And unlike no-AF cash back cards, keeping AF cards requires regular evaluation to make sure they are still valuable.

Re: Evaluating Annual Fee Cards

galahad15 — Tue, 11 Oct 2022 13:14:45 GMT

The only AF card I currently have is my BoA Amtrak Guest Rewards WMC (soon to be switching from BoA to FNBO as the issuer). The main reason it interested me is that every year, one of the major benefits it provides is a free companion ticket when you buy the first ticket at full price. There are other benefits as well, such as 3% cashback on all Amtrak purchases, intro bonus points offers that can be redeemed for 100%-free Amtrak trips, etc.

I'm kind of on the fence about continuing to keep the card once the issuer transitions from BoA to FNBO, since I haven't been able so far to find any reference in the FNBO literature to indicate that they will be preserving the annual free companion ticket benefit that was offered from when BoA was the issuer. If FNBO does in fact axe the free annual companion ticket benefit, I would consider that a major nerf that would also be eliminating the main reason the card appealed to me in the first place, and so I may consider closing it if that turns out to be the case.

Re: Evaluating Annual Fee Cards

Anonymous — Tue, 11 Oct 2022 13:31:30 GMT

@Aim_High wrote:
Also, on the same trip, I used the 85K free night credit from my $450 (now $650) AF Bonvoy Brilliant card for a premium large city room worth $700 to $850 if booked for cash.

The question of how to value often comes up with premium cabin international flights, basically "Yes, you got a notional 4cpp but would you really have paid $20K for that flight?" The answers can vary! (If you really really need that flight, and you would have paid $20k, then you can cliam full value..)

So on a much more modest scale here, @Aim_High more than exceeded the new AF on this one stay, but the same question applies, if you didn't have the card, would you have spent that money

Re: Evaluating Annual Fee Cards

BronzeTrader — Tue, 11 Oct 2022 13:39:24 GMT

I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

Re: Evaluating Annual Fee Cards

ptatohed — Tue, 11 Oct 2022 17:07:01 GMT

I hear a lot of people say that the perks cover the AF. I don't think that is the only metric to use however. I would assume covering the AF is a given but, at the end of the year, did you get benefit with your AF card beyond if you had simply used a no AF card? To me, that's the important thing. I'll use a simplified example just to make my point. You buy a lot of groceries. In fact, you buy exactly $6,000 per year in groceries. So, you pay a $95 AF to get 6% CB, up to $6k spend, with the AmEx BCP. .06 x $6,000 - $95 = $265 (works out to be 4% CB). You covered the AF, great. But had you simply used a citi CC at 5%, you would have received .05 x $6,000 = $300, or $35 more. Again, a simplified example because I'm leaving out the 6% streaming and 3% gas (and it confines your CC to grocery only) but I am just trying to make the point that I think beyond meeting and exceeding the AF, are you doing better than a no AF route?

Not to mention the stress of using enough credits to cover that 3 digit AF! What if you skip a month or two of using Uber?!

And, as was pointed out, are you using the credits only to cover the AF? Or would you really be ordering through Uber once per month? For me no. For some yes.

Just something to consider.

Re: Evaluating Annual Fee Cards

Kforce — Tue, 11 Oct 2022 19:08:05 GMT

Agree ^^^^ with @ptatohed , @galahad15 and @Anonymous

Once you get an AF card, the fee is on-going, however your need, spend and other reward particulars are ever changing.

A little real math should be used to filter the hype & advertising and get a closer real value.

Rewards in upgrades, lounges, extra bags, etc have a value that is "What", depending on point of view.

Re: Evaluating Annual Fee Cards

wasCB14 — Tue, 11 Oct 2022 19:40:50 GMT

@BronzeTrader wrote:
I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

More precisely, you should be getting benefits and rewards net of the AF greater than what no-AF cards would be giving you.

If you got an Amex Platinum, used only $95 of the available statement credits, and spent $100,000 earning 1x MR per dollar, and took a statement credit at 0.6 cpp you'd have broken even. But not even this Amex fan would say that was an appropriate card for you.

Re: Evaluating Annual Fee Cards

Anonymous — Tue, 11 Oct 2022 21:08:58 GMT

@wasCB14 wrote:
@BronzeTrader wrote:
I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

More precisely, you should be getting benefits and rewards net of the AF greater than what no-AF cards would be giving you.

If you got an Amex Platinum, used only $95 of the available statement credits, and spent $100,000 earning 1x MR per dollar, and took a statement credit at 0.6 cpp you'd have broken even. But not even this Amex fan would say that was an appropriate card for you.

@wasCB14 wrote:
@BronzeTrader wrote:
I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

More precisely, you should be getting benefits and rewards net of the AF greater than what no-AF cards would be giving you.

Even more precisely, you should be getting benefits and rewards net of the AF greater than what you would get net with other cards (that you have or could reasonably get). i.e. the card should also out-perform (for you) other AF cards.

Re: Evaluating Annual Fee Cards

ptatohed — Tue, 11 Oct 2022 21:52:08 GMT

Also, for me, there is a "it's just not worth it" factor that kicks in with an AF card. For instance, I'm a CB guy and was/am always on the prowl for anything over 2% CB, particularly on everyday purchases. Well, remember when the Alliant CB Visa was 2.5% CB with a $95 annual fee? Trust me, I thought about it. The annual spending break even point over a no AF 2% card starts after your first $19,000. Yes, mrs. ptatohed and I spend about $30,000 on no cat spending annually so yes I would have met the AF and benefited over a non AF 2% card, but........... what if I didn't? What if I had a year of less spending or a year with more spending on other cards and only spent a little over $19,000? Or, forbid, under $19,000? It's just not worth it. The pressure to have to use an AF card is unpleasant to me. If I use my no AF cards, great, if I decide not to, no biggy.

Re: Evaluating Annual Fee Cards

Anonymous — Tue, 11 Oct 2022 21:58:41 GMT

@ptatohed wrote:
Also, for me, there is a "it's just not worth it" factor that kicks in with an AF card. For instance, I'm a CB guy and was/am always on the prowl for anything over 2% CB, particularly on everyday purchases. Well, remember when the Alliant CB Visa was 2.5% CB with a $95 annual fee? Trust me, I thought about it. The annual spending break even point over a no AF 2% card starts after your first $19,000. Yes, mrs. ptatohed and I spend about $30,000 on no cat spending annually so yes I would have met the AF and benefited over a non AF 2% card, but........... what if I didn't? What if I had a year of less spending or a year with more spending on other cards and only spent a little over $19,000? Or, forbid, under $19,000? It's just not worth it. The pressure to have to use an AF card is unpleasant to me. If I use my no AF cards, great, if I decide not to, no biggy.

Yes, no biggy, but potentially leaving money on the table! And I would guess all of these are value specific: if a flat 5% card came up with a $10 AF, you might decide it's worth it, even though a version of the above applies.

Re: Evaluating Annual Fee Cards

wasCB14 — Tue, 11 Oct 2022 22:42:52 GMT

@Anonymous wrote:
Even more precisely, you should be getting benefits and rewards net of the AF greater than what you would get net with other cards (that you have or could reasonably get). i.e. the card should also out-perform (for you) other AF cards.

I'll see your "other AF cards" and raise you "as well as reward debit-type programs and cash discounts".

Re: Evaluating Annual Fee Cards

ptatohed — Tue, 11 Oct 2022 22:43:41 GMT

@Anonymous wrote:
@ptatohed wrote:
Also, for me, there is a "it's just not worth it" factor that kicks in with an AF card. For instance, I'm a CB guy and was/am always on the prowl for anything over 2% CB, particularly on everyday purchases. Well, remember when the Alliant CB Visa was 2.5% CB with a $95 annual fee? Trust me, I thought about it. The annual spending break even point over a no AF 2% card starts after your first $19,000. Yes, mrs. ptatohed and I spend about $30,000 on no cat spending annually so yes I would have met the AF and benefited over a non AF 2% card, but........... what if I didn't? What if I had a year of less spending or a year with more spending on other cards and only spent a little over $19,000? Or, forbid, under $19,000? It's just not worth it. The pressure to have to use an AF card is unpleasant to me. If I use my no AF cards, great, if I decide not to, no biggy.
Yes, no biggy, but potentially leaving money on the table! And I would guess all of these are value specific: if a flat 5% card came up with a $10 AF, you might decide it's worth it, even though a version of the above applies.

True, I would take the PCM 5% CB everything card even with its $49 AF!

Re: Evaluating Annual Fee Cards

xenon3030 — Wed, 12 Oct 2022 07:18:25 GMT

To see whether a card with AF is worth keeping, one should compare the returning cashbacks/points if placing such charges on cards without AF and afterward, compare them to the such returns, if placing them on the cards with AF AND also include the AF in the calculations. If doing this and also include additional perks that one can use, depending on the type of charges e.g. groceries/hotel/flight, it may or may not worth to keep the cards with AF.

My cashback cards almost cover ~5% in all categories without AF. So, some months ago, I decided to close my Amex Gold while decided to keep CSP. If I by chance become a frequent traveler, my equations become very different...

Re: Evaluating Annual Fee Cards

BronzeTrader — Wed, 12 Oct 2022 15:26:30 GMT

@ptatohed wrote:
I hear a lot of people say that the perks cover the AF. I don't think that is the only metric to use however. I would assume covering the AF is a given but, at the end of the year, did you get benefit with your AF card beyond if you had simply used a no AF card? To me, that's the important thing. I'll use a simplified example just to make my point. You buy a lot of groceries. In fact, you buy exactly $6,000 per year in groceries. So, you pay a $95 AF to get 6% CB, up to $6k spend, with the AmEx BCP. .06 x $6,000 - $95 = $265 (works out to be 4% CB). You covered the AF, great. But had you simply used a citi CC at 5%, you would have received .05 x $6,000 = $300, or $35 more. Again, a simplified example because I'm leaving out the 6% streaming and 3% gas (and it confines your CC to grocery only) but I am just trying to make the point that I think beyond meeting and exceeding the AF, are you doing better than a no AF route?

Not to mention the stress of using enough credits to cover that 3 digit AF! What if you skip a month or two of using Uber?!

And, as was pointed out, are you using the credits only to cover the AF? Or would you really be ordering through Uber once per month? For me no. For some yes.

Just something to consider.

This thinking is just incorrect.

If there is a card that offers $20 or $240 dining credit for the entire year. And the annual fee is $150 or even $200. I get more than the AF I pay. So I earn more than what I pay. So this card is a keeper. It has nothing to do with what other non AF card I use to pay for this meal. Sure this card may have good or bad earning rate. It has nothing to do with what I get out of this card. Sure I could use your non AF card to pay for this meal. But I do not think your non AF card would offer anything better, generally speaking.

There are quite a bit cards like this. Most of the hotel cards are net positive to keep. You do not need to use them to pay for your spending. They are perfectly good examples.

Nice try....

Re: Evaluating Annual Fee Cards

BronzeTrader — Wed, 12 Oct 2022 15:28:17 GMT

@Kforce wrote:
Agree ^^^^ with @ptatohed , @galahad15 and @Anonymous

Once you get an AF card, the fee is on-going, however your need, spend and other reward particulars are ever changing.
A little real math should be used to filter the hype & advertising and get a closer real value.
Rewards in upgrades, lounges, extra bags, etc have a value that is "What", depending on point of view.

The entire world is changing. When credit card changes, you change too. You are not married to any particular card. When certain card does not pay, call to cut it up. Easy.

Re: Evaluating Annual Fee Cards

BronzeTrader — Wed, 12 Oct 2022 15:31:48 GMT

@wasCB14 wrote:
@BronzeTrader wrote:
I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

More precisely, you should be getting benefits and rewards net of the AF greater than what no-AF cards would be giving you.

If you got an Amex Platinum, used only $95 of the available statement credits, and spent $100,000 earning 1x MR per dollar, and took a statement credit at 0.6 cpp you'd have broken even. But not even this Amex fan would say that was an appropriate card for you.

Wonder why any "sane" person would do that?? That is so funny to say that.

When I use my AmEx Platinum card, I try to get more than $700 from its "benefits". Then I used this card to charge airfare only. No sane person will charge grocery shopping on this card.

It is quite easy to figure out.

Re: Evaluating Annual Fee Cards

BronzeTrader — Wed, 12 Oct 2022 15:34:49 GMT

@Anonymous wrote:
@wasCB14 wrote:
@BronzeTrader wrote:
I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

More precisely, you should be getting benefits and rewards net of the AF greater than what no-AF cards would be giving you.

If you got an Amex Platinum, used only $95 of the available statement credits, and spent $100,000 earning 1x MR per dollar, and took a statement credit at 0.6 cpp you'd have broken even. But not even this Amex fan would say that was an appropriate card for you.
@wasCB14 wrote:
@BronzeTrader wrote:
I do not care how much the annual fee is. If you can get the benefits or rewards more than the fees you pay without a lot of efforts, then it is worth paying the annual fee. This is the break-even level. You do not come above to positive all the time. By then, it is time to downgrade or cut the card.

The BILT and most of the 2x or 2% cards without annual fees are keepers and daily spend cards. The AmEx Platinum is probably not one of those. Too much efforts to get value out of it.

More precisely, you should be getting benefits and rewards net of the AF greater than what no-AF cards would be giving you.

Even more precisely, you should be getting benefits and rewards net of the AF greater than what you would get net with other cards (that you have or could reasonably get). i.e. the card should also out-perform (for you) other AF cards.

People are just so funny.

So if I make $100 free money, I want $200 more. If that what you are saying?

The "benefits" form those AF cards have nothing to with whatever other non AF or low AF cards you keep or use. What "benefits" the Citi Double Cash card offers you?

Re: Evaluating Annual Fee Cards

BronzeTrader — Wed, 12 Oct 2022 15:44:41 GMT

@xenon3030 wrote:
To see whether a card with AF is worth keeping, one should compare the returning cashbacks/points if placing such charges on cards without AF and afterward, compare them to the such returns, if placing them on the cards with AF AND also include the AF in the calculations. If doing this and also include additional perks that one can use, depending on the type of charges e.g. groceries/hotel/flight, it may or may not worth to keep the cards with AF.

My cashback cards almost cover ~5% in all categories without AF. So, some months ago, I decided to close my Amex Gold while decided to keep CSP. If I by chance become a frequent traveler, my equations become very different...

Not really.

The AmEx Gold card is not even a travel card. It is more of a daily card with 4x MR on dining and grocery shopping. Those are two highest spending most people have, other than rent and mortgage.

AmEx Gold has $10/month dining and $10 Uber credit. That is a total of $240 each year. So you just pay $10 effective AF for someone who can use all $20/month credit. So you are pretty much break even with a no AF card with 4x on dining and grocery and 3x on travel.

And what you get with the $95 CSP?? What benefits you get to offerset the $95 AF? And how much points you are losing out with the lower earning rate? You get the earning on grocery shopping? Wonder what non AF cards you use in grocery shopping.

Quite interesting....

Re: Evaluating Annual Fee Cards

Kforce — Wed, 12 Oct 2022 16:36:17 GMT

@BronzeTrader wrote:

And what you get with the $95 CSP?? What benefits you get to offerset the $95 AF? And how much points you are losing out with the lower earning rate? You get the earning on grocery shopping?

Wonder what non AF cards you use in grocery shopping.

The USAlliant is 6% grocery uncapped, no AF.

There are a few rotators with 5%, gas or grocery.

At least on card with 5% gas all year.

The Citi 5% for high category

Switch rotators & Citi or get gas only and grocery only

For me a 5% gas and 6% grocery, both no AF trump the Amex. (Gold or BCP)

The BCP 6% is only returning 4.7% with perfect spend and $100/mo streaming

Any, yes any 5% cards with no AF will earn more.

BCP could get an award for most consistant "up-down reward offers" to pull in more users that don't need the card or best advertising

Re: Evaluating Annual Fee Cards

BronzeTrader — Wed, 12 Oct 2022 18:33:06 GMT

@Kforce wrote:
@BronzeTrader wrote:

And what you get with the $95 CSP?? What benefits you get to offerset the $95 AF? And how much points you are losing out with the lower earning rate? You get the earning on grocery shopping?

Wonder what non AF cards you use in grocery shopping.
The USAlliant is 6% grocery uncapped, no AF.
There are a few rotators with 5%, gas or grocery.
At least on card with 5% gas all year.
The Citi 5% for high category
Switch rotators & Citi or get gas only and grocery only

For me a 5% gas and 6% grocery, both no AF trump the Amex. (Gold or BCP)
The BCP 6% is only returning 4.7% with perfect spend and $100/mo streaming
Any, yes any 5% cards with no AF will earn more.
BCP could get an award for most consistant "up-down reward offers" to pull in more users that don't need the card or best advertising

If I can hold 20 credit card that fit my lifestyles and I make $100 profit from each card, I'll be happy to hold all of them. It has nothing to do with what those non AF card can do to earn whatever % you can earn.

Because I can also hold those non AF cards, all of those you have and proud of. Each card has nothing to do with the other.

This is something a lot people are missing here.

Sure those AF cards offer much more opportunities than all those non AF cards you mentioned.

No correlation. A lot people just get all this wrong.