Reward credit cards come in all shapes and sizes, though one big picture way to distinguish between them is whether or not they have an annual fee. Premium credit card rewards are ones that require you to pay an annual fee, something that often turns people away, regardless of how good the program sounds on paper.
Should you sign up for one of these premium credit card rewards programs? Is it worth it to pay premium credit card fees just for the perks and rewards? The number one question that is likely running through your mind when faced with these questions is: are the rewards significant enough to warrant the cost of the annual fee?
Many credit cards with rewards programs do not require an annual fee. So, why bother signing up for one that does? Typically, the credit card rewards programs that do require an annual fee have much “bigger” rewards (i.e. they cost more in general), so you’re expected – at least somewhat – to pay for it. On average, many credit cards charge less than $100 for their annual fees, though for some programs, the fee can be even higher.
When you enter into one of these programs, you can see several different kinds of rewards. For example, you might see rewards linked directly to your credit card. In other words, by using your premium credit card, you might be able to receive special price protections or extended warranties. Also, you could receive insurance and/or travel-based rewards. Some premium credit card reward programs will offer such things as travel insurance for various parts of your trip including car rental insurance and emergency travel assistance. On many airline premium credit cards, you can rack up miles every time you use the card, which you can redeem for flights, hotels, and other travel perks.
So, how can you determine whether or not the annual fees of these premium credit cards are worth it? Well, unfortunately, there isn’t an easy answer to this question. Everyone’s financial situation is different, so while the fee may be worth it for one person, it may be a waste of money for another.
The only real answer that can be given is this: the annual credit card fee on a premium credit card is worth it when you get more back than what you put in.
While a somewhat vague answer, it makes complete sense. Take the airline premium credit card for example. Say you only travel once per year at best, and you don’t do much shopping at stay at the homes of friends and family. Is it worth it to you to pay an annual fee for something you’ll likely never take advantage of? Probably not.
What you need to do to determine if paying the annual fee for a premium credit card program is simple. Find out what the rewards are, and then do some calculations to determine if what you will be getting out of it is worth significantly more than the amount you’d be putting in every year.