You’ve decided to start your travel hacking hobby, you understand earning and burning your points and now you need to decide which credit card to get but there’s so many to choose from! While we’ll get to our recommendations in another post, we first need to address the annual fees that credit cards come with as they can certainly scare away some people.
Some credit cards like the Chase Freedom cards do not have any annual fee. A number of credit cards have a $95 fee and some are several hundred dollars. While some of those cards might not make sense to everyone, you cannot let high fees scare you away. While we try to keep everything simple here, you will have to always do the math.
For example, let’s look at the United Explorer card with its $95 annual fee. You’ll get 2 United club passes that are worth almost the fee itself but to be honest, the clubs are hardly that exciting and you probably won’t feel like you are getting much value. Then you have to figure out when and if you’ll actually use them. If you fly out of or to a United hub several times a year, then you’ll probably be able to use them and that will be some value. If you ate enough food for you and your guest to not have to pay those high prices for airport restaurants, then you can say it is worth $40. Now let’s assume you checked a bag 3 times a year. That saved you $30 three times which is $90. Putting all other benefits of the card aside, you spent $95 on the card and got $140 worth of value with the final total saved being $45. That’s a pretty good deal. There are of course other perks to this card that make it even more valuable but again, just keeping it simple here. This is just an example of the type of math you have to do.
Quite often, the higher the annual fee the better the perks. The Chase Sapphire Reserve is an expensive card but it has a ton of perks. The Priority Pass membership alone provides a ton of value for many people. It also provides incredible insurance which is really nice if you have issues with your flight, get into a car accident with your rental car, etc. A lot of those cards give you money back. Again, using the Chase Sapphire Reserve as an example, the annual fee is a whopping $550! But they give you $300 back towards your travel. So if you book $300 worth of travel on the card, you’ll get that back each year making the real annual fee more like $250. Factor in whatever value you put on the Priority Pass membership and it’s even less. Let’s say you think it’s only worth $100 to you, that’s $150 per year for a card that will give you some real piece of mind when traveling. There are plenty of other benefits that can reduce that down to zero such a no foreign transaction fees and Global Entry/Precheck reimbursement.
The important thing here is to not get scared off by annual fees but at the same time, don’t just get a card because someone told you to get it. Understand what the benefits are and do the math to see if it works for you.