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Should You Pay An Annual Fee On A Credit Card?

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.

Travel credit cards are a no-brainer the first year. Who could resist the allure of a sign-up bonus that is worth $500 or more? But what happens after the first year and the annual fee needs to be paid?

There are a lot of considerations that go into deciding whether or not you want to pay that annual fee. Here’s some tips to weigh the benefits–or not–in renewing your travel credit card.

Credit Card Sign Up Bonuses Are Awesome

One of my favorite reasons to get a new credit card is that the sign-up bonuses are so lucrative. Banks are willing to give you a big bonus to attract your business and keep you as a customer. These offers can pay huge dividends for people who are willing and able to make the switch.

Keep in mind, you need to have excellent credit in order to qualify for the best credit card sign-up bonuses.

Free Travel

I love using credit card sign-up bonuses for free travel. Most of the credit cards that I apply for give enough airline miles, hotel points, or cash back to pay for a big chunk of the cost of the vacation.

For example, the Capital One Venture Rewards Credit Card is currently offering 75,000 Miles once you spend $4,000 on purchases within the first 3 months from account opening. Redeem those miles for travel after earning the top tier’s bonus!

Here are some tips to make sure you hit the minimum spend requirements on a travel credit card.

Don’t Forget Annual Fees

Travel credit cards are great, but it can’t be all take and no give. To pay for the sign-up bonuses and excellent benefits, banks charge annual fees for most travel credit cards.

Many travel credit cards have annual fees of $99 or less. However, multiple premium credit cards have been launched in the last couple of years that have annual fees ranging from $350 to $550. That is a lot of money!

Click here to compare travel rewards credit cards

First Year’s Annual Fee Waived

Because the credit card marketplace is so competitive, many travel credit cards are willing to waive the first year’s annual fee. They want you to sign up for the credit card, experience the benefits, then keep the credit card because of the perks.

When comparing various credit card offers, focus first on the travel credit cards that are willing to waive the annual fee. This will save you money and help you get introduced to the world of travel rewards.

As I talk to friends and family, many of them say that they avoid credit cards with annual fees. That sounds like the right strategy. However, when you do that, you are totally missing out on excellent benefits that can enhance your travel experience.

Click here to compare travel rewards credit cards

But The Perks Can Be Worth It

As much as I hate paying annual fees, certain credit cards are worth the cost. They offer perks that I use year in and year out that save me time and money.

Free Checked Bags

Although I avoid checking bags as much as possible, sometimes I need to do it. I like co-branded airline credit cards because they will waive the checked bag fee whenever you travel domestically and buy your ticket with the card.

Airlines have recently raised the checked bag fee from $25 to $30 (or more). That is per bag and each way that you fly. If you’re traveling as a family, the checked bag fees could end up being more than the cost of one ticket!

Depending on which airline credit card you have, you can check one bag for free for up to eight people traveling with you. That is a huge savings opportunity. A family of four can easily recoup the cost of the annual fee in one round-trip flight.

Priority Boarding

Getting onto an airplane is almost as insane as a Black Friday sale. Everyone’s pushing and shoving for their spot in line.

With the airline’s co-branded credit card, you’ll avoid a lot of that stress and board before the majority of people. This will allow you ample time to get to your seat and grab that coveted overhead bin space.

Here’s a little secret–on most airlines you can buy a Basic Economy ticket, then use your airline credit card to check a bag for free, have priority boarding, and be allowed a free carry-on bag.

Related: How To Save Money On Travel With The Right Credit Card

Annual Free Hotel Night

Hotel credit cards are some of my favorites to keep year after year. The main reason is the annual free hotel night. Ok, it’s technically not free since you’re paying an annual fee. But, the hotels that I redeem the annual free night at are worth at least 2x what I pay in annual fees. From a different angle, I’m pre-paying for a future hotel stay and saving at least 50%.

If you’re going to travel anyway, why wouldn’t you want to save more than half of the cost of your room?

When selecting your hotel credit card, pay attention to the fine print. Some banks are starting to require a certain level of spending in order to earn the free night. And other cards offer the opportunity to earn more than one free night based on how much you use the credit card.

Click here to compare hotel credit cards

Instant Status

With every hotel travel credit card, cardholders receive a boost in their loyalty status. The awesome thing is that you can leapfrog everyone else who is paying for their rooms before you’ve paid for a single night at that hotel chain.

Most hotel credit cards will give you mid-tier status as soon as your credit card is approved and your hotel loyalty account is linked. Some hotel credit cards, like the one, will reward you with even higher status if you spend a certain amount on your credit card each year.

Global Entry or TSA PreCheck Reimbursement

I hate waiting in lines. That’s why Global Entry and TSA PreCheck are wonderful investments if you fly. Instead of waiting in long lines, taking off your shoes, and everything else, you get to skip that process and head to special lines that make traveling easier.

Most premium travel credit cards will reimburse you up to $100 for the application fee for Global Entry or TSA PreCheck. If more than one of your travel credit cards offers this benefit, use the credit to sign-up your spouse, children, or friends.

Airport Lounge Access

When flying, few benefits are as nice as having access to airport lounges. Instead of waiting in the terminal like everyone else, head to the lounge for free drinks, snacks, wifi, and more. Some lounges offer full meals, showers, and massages. All complimentary.

Click here to compare travel rewards credit cards

Before You Renew Your Credit Card

Ok, so you’ve had your travel credit card for a year and the annual fee is coming due. Should you keep the card or cancel it? Here’s what you should do.

Evaluate Perks vs Cost

Look up the annual fee and compare it against the perks that you are using. It’s pretty simple math. For airline credit cards, do you check bags and fly a couple of times a year? If so, keeping the credit card for the free bags is a no-brainer.

With hotel credit cards, are you using the annual free night? Yes, keep the credit card. No? You’re throwing away a great opportunity to travel at a huge discount. Even if you use the free night for a local staycation, it might be worth keeping the hotel credit card.

Line up the pros and cons of having the credit card. The pros are all of the benefits. The biggest con is the annual fee. Have an honest conversation with yourself. No matter how excellent the benefits are if you’re not using them, it may not make sense to pay the annual fee.

Related: What To Do If Your Credit Card Application Is Denied

Make a Retention Call

Many people don’t do this, but it actually works. When the annual fee hits your account, contact customer service and tell them that you’re thinking about canceling the travel credit card. Don’t tell them that you want to cancel, only that you’re thinking about canceling.

Having this conversation will put the bank in crisis mode. They want to keep you as a customer. If you’ve paid your bills on time and have been using the credit card regularly, they don’t want to lose you.

Ask them what offers they have available. Sometimes the answer is nothing, but that’s not the norm. Most of the time, the bank will either waive the fee, give you bonus points, or offer a bonus if you spend a certain amount on the card. Evaluate their offer and do what’s right for you.

Click here to compare travel rewards credit cards

Should You Renew Your Travel Credit Card?

You work hard for your money. Don’t give it to the bank automatically. I make sure that the banks are working just as hard for my money as I did.

Annual fees and benefits change on a regular basis. What was an awesome travel credit card last year, could be a total dud this year. Before you renew your travel credit card evaluate the benefits against the annual fee that the bank is charging. Sometimes the benefits are worth far more, but that’s not always the case. Benefits only have value if you are using them.

What credit cards do you renew each year? Have you canceled a credit card recently because the benefits weren’t worth the cost? Let us know in the comment section below.

Related Articles

If you really want to maximize your travel rewards check out our Ultimate Guide to Credit Card Travel Rewards series!

Top Travel Rewards Offers

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Details: $95 annual fee | Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening.

Most Flexible Travel Card

The Capital One Venture Rewards Credit Card can be used to offset almost any travel expense.
Details: $95 annual fee | Enjoy a one-time bonus of 75,000 Miles once you spend $4,000 on purchases within 3 months from account opening

Best Card for Side Hustlers and Business Owners

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Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.
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