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Premium travel credit cards like the Chase Sapphire Reserve® and The Platinum Card® from American Express have plenty of travel perks. These highly sought-after cards command a high annual fee of $550 (for the Reserve) and $695 (for the Platinum Card; See Rates & Fees for the Amex Platinum). But many frequent travelers are wondering if paying annual fees on premium credit cards is still worth it.
Terms apply to American Express benefits and offers. Visit americanexpress.com to learn more.
Is Paying Annual Fees On Credit Cards During the Coronavirus Pandemic Worth It?
The answer isn’t an easy yes or no as there are many variables with the current pandemic. We know the domestic travel restrictions and international travel restrictions will end as the health situation improves. However, we don’t know when the threat of COVID-19 will dissipate and the travel industry can establish a new level of normalcy.
Why Do Banks Charge Annual Fees?
Many of us are familiar with the mantra, “You get what you pay for.” In travel, a first-class airline ticket costs more than flying coach. Both tickets get you to the destination, but the premium cabin is more luxurious. Having the extra amenities, lie-flat seats, and personal service can be worth the higher cost on a long flight.
The same principle applies when comparing consumer travel credit cards and premium travel credit cards. The cheaper travel credit cards earn rewards points on purchases to book future award travel. However, premium credit cards offer swanky benefits, usually including some of the following:
- Travel fee credits
- Airport lounge access
- Complimentary hotel nights or on-site amenity savings
- Enhanced hotel loyalty membership states
- Robust travel insurance benefits
- Global Entry or TSA PreCheck application fee credit reimbursement
- Complimentary Boingo WiFi
Banks are able to offer these lavish benefits by charging an annual fee between $450 or $695. While this annual fee is eye-popping at first glance, regularly using the benefits means your annual savings are more than you spend.
Standard travel no annual fee credit cards or those with a fee of $100 or less have relatively few benefits. Your annual fee may be lower, but your potential benefit value is also lower.
If you only travel once or twice a year, a cheaper card is usually the better option. But if you travel often or make at least one epic trip per year, the premium benefits can save you more money in the long run.
For instance, flexible rewards cards with a $95 annual fee may have travel insurance (like the Chase Sapphire Preferred® Card) and Global Entry or TSA PreCheck credit (like the Capital One Venture Rewards Credit Card).
Branded airline and hotel credit cards offer loyalty program perks like free checked bags or a complimentary hotel night certificate.
Here are some examples of the two leading premium credit cards.
The Platinum Card From American Express
- Airport lounge access (Centurion, Priority Pass (enrollment required), Delta Sky Club, Escape, and others)
- Global Entry or TSA PreCheck application fee credit
- Hilton Honors Gold status and Marriott Bonvoy Gold Elite status (enrollment required)
- Car rental privileges
- 1:1 point transfers to airline and hotel partners
The Platinum Card® from American Express also earns 5x Membership Rewards® Points for flights booked directly with airlines or with American Express Travel, up to $500,000 on these purchases per calendar year, and earns 5x Membership Rewards® points on prepaid hotels booked with American Express Travel.
Cardholders can get $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection bookings with American Express Travel when they pay with your Platinum Card®.
Also, select one qualifying airline and then receive up to $200 in statement credits per calendar year when incidental fees are charged by the airline to your Card.
Plus, American Express has expanded The Centurion® Network to include 40+ Centurion Lounge and Studio locations worldwide. Now there are even more places your Platinum Card® can get you complimentary entry and exclusive perks.
Other Platinum Card from American Express Benefits
There’s also a digital entertainment credit, making this card one of the best for streaming services. Cardholders can get up to $20 in statement credits each month when they pay for eligible purchases with the Platinum Card® at your choice of one or more of the following providers: Peacock, Audible, SiriusXM, The New York Times, and other participating providers. Enrollment required.
In addition to enjoying TSA PreCheck or Global Entry access, cardholders can also enjoy CLEAR perks. Breeze through security with CLEAR® Plus at 45+ airports nationwide and get up to $189 back per year on your membership (subject to auto-renewal) when you use your Card.
Another exciting benefit is the ability for cardholders to get up to $300 back each year on an Equinox+ subscription or any Equinox club membership when they pay with their Platinum Card. Enrollment required. Learn more.
Plus, get a $155 Walmart+ credit, which covers the cost of a $12.95 monthly Walmart+ membership with a statement credit after you pay for Walmart+ each month with your Platinum Card. The cost includes $12.95 plus applicable local sales tax.
Get the full details and learn more in our in-depth The Platinum Card from American Express review.
The annual fee is $695 (See Rates & Fees) but can be offset with the perks, which are valued at over $1,400.
Related: How Hard is it to get the Platinum Card from American Express?
Welcome Bonus Offer
New The Platinum Card® from American Express cardmembers can earn 80,000 Membership Rewards® points after spending $6,000 on purchases on their new Card in the first 6 months of Card Membership.
Learn more: Johnny Jet Recommended Credit Cards
Chase Sapphire Reserve
The Chase Sapphire Reserve® offers a variety of travel and dining benefits:
- $300 travel credit
- Priority Pass Select lounge access
- Global Entry or TSA PreCheck fee credit
- Luxury Hotel and Resort Collection special benefits
- Trip cancellation and interruption insurance, up to $10,000 per person ($20,000 per trip)
- Primary rental car collision and theft coverages (on most car rentals)
- 1:1 point transfers to airlines and hotels
- 50% point redemption bonus when booking travel through the Chase travel portal
Plus, earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases.
Points are worth 50% more when redeemed for statement credits against existing purchases in select, rotating categories with the Chase Pay Yourself Back feature.
Your Ultimate Rewards and Chase Sapphire Reserve can still be more valuable when transferring to airlines and redeeming.
New Chase Sapphire Reserve® cardholders can earn 60,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening. That’s $900 toward travel when redeemed through Chase Ultimate Rewards®.
The annual fee is $550 for the primary card and $75 per additional user.
When to Keep Your Premium Credit Card
Is it worth paying annual fees on premium credit cards? Keeping your premium credit card is worth it in these instances:
- You anticipate traveling more often in 2021
- The modified coronavirus benefits offset the annual fee
- You use the “premium” retail and dining benefits regularly
If the travel shutdown prolongs deep into 2021, we may see banks offer more “retention perks.”
Related: Best Credit Cards for After Travel Restrictions Are Lifted
Downgrade Instead of Canceling
No longer getting enough value from a premium card doesn’t mean your only alternative is closing your account. In fact, account closures should be your last option as you can lose an important part of your credit history.
An exception to the rule is if you opened the account in the last year or two as your credit age is low.
You may also decide to cancel if you can qualify for a signup bonus on a cheaper card soon.
Downgrading can be the better option as you keep your account history but pay a lower fee. You can also avoid a hard credit check (here are some of the best places to get a free credit score check). However, you forfeit the premium purchase rewards categories and add-on benefits.
Most banks will let you downgrade to a lower-cost credit that earns the same credit card currency. For example, the Chase Sapphire Reserve can downgrade to the Chase Sapphire Preferred® Card ($95 per year). The $0 annual fee Chase Freedom Flex℠ and Chase Freedom Unlimited® are possibilities too.
With the Platinum Card from Express, consider the American Express® Gold Card instead as its annual fee is $250 (See Rates & Fees). You might also be able to downgrade to the Amex EveryDay® Preferred Credit Card ($95 per year – See Rates & Fees) the Amex EveryDay® Credit Card ($0 annual fee – See Rates & Fees) as well to keep earning Membership Rewards.
With the Citi Prestige® Credit Card, you may switch to the Citi Premier® Card instead. The Premier Card earns ThankYou points like the Prestige, but only costs $95 per year.
If you have a premium airline or hotel credit card, you can request a downgrade to the consumer or no annual fee version.
So, Is Paying Annual Fees on Premium Credit Cards Worth It Right Now?
An extended travel shutdown can be a valid reason to discontinue paying annual fees for premium credit cards. Downgrading to the standard consumer version saves you money but still lets you maximize your travel potential when you travel more sporadically. Hopefully, the travel restrictions end sooner instead of later so premium travel cards are still the best option for frequent travelers.
Can I cancel a credit card before I pay an annual fee?
It’s possible to cancel your credit card before you pay an annual fee. You will need to cancel before your card opening anniversary date. Your credit card statement should state when the bank will charge your annual fee. To avoid a potential fee, you should cancel your card at the last statement closing period before your card anniversary date.
Make sure you use any remaining credits and travel benefits before canceling. You forfeit any remaining benefit value once the bank closes your account.
One exception to this cancellation suggestion is for a new credit card. Most banks require you to keep your credit card account open for at least 12 months. Canceling before your first anniversary means you might have to repay the signup bonus you earn. The bank may also close other cards you have with them as well, without your consent.
Before applying for a new card, plan on keeping the card for at least one year. After the first anniversary, use what benefits you can for that second year, such as hotel night certificates. After exhausting these card renewal perks, pay off your balance, and close the account or request a downgrade to a credit card with no annual fee.
Will I get charged if I don’t use my credit card?
Credit cards don’t charge an inactivity fee, but you pay the same annual fee whether you use the card for one purchase per year or daily. Closing or downgrading an expensive credit card is a wise move when the cost of paying annual fees exceeds the value you get in rewards points and additional benefits.
In addition to saving money, prolonged account inactivity can lead to a credit limit reduction. This practice applies to cards with and without annual fees. Less available credit can hurt your credit score. Banks are initiating credit line decreases more often during the pandemic to prevent credit card fraud and credit card defaults.
Should you close credit cards you don’t use?
It’s not a wise move to close credit cards you rarely use if they are some of your oldest accounts. These account closures can harm several credit score factors including your average account age and payment history. If this card has an annual fee, see if the bank will downgrade your account to a no annual fee credit card.
Closing accounts that are only a few years old or younger will have a lower negative effect on your credit score. You may consider downgrading these accounts as well to continue building credit.
One reason you might close an account is to get a potentially larger credit line at another bank. Each bank has its own formula for determining your credit limit on each card you open. However, your credit limit for subsequent cards might be less than your first cards if your credit score and annual income don’t improve drastically.
Another reason to close an account is if you have too many cards with one bank. Most banks let you have up to 5 open credit cards with them at one time. If you can’t switch an existing account to a different credit product, closing an account may be your only option to apply for a new credit card and get approval.
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For rates and fees of The Platinum Card® from American Express, please click here.
To learn more about the rates and fees of The American Express® Gold Card, please click here.
For rates and fees of The Amex EveryDay® Preferred Credit Card, please click here.
And for rates and fees of The Amex EveryDay® Credit Card, please click here.
Do I have to transfer or use the points on platinum Amex before downgrade or cancel? The other reason I’m considering is losing the extended warranty on the items I charged on Amex if I decided to cancel/downgrade.