CREDIT CARDS 101: How To Justify Credit Card Annual Fees

Ever wondered why some people pay credit card annual fees? Learn how it can make sense and why some of us have multiple cards with fees! Click “Show More” to see Ad Disclosure. 📲 MAXREWARDS - Manage credit cards & rewards! Get Gold level for free with PROMO CODE = markr http://markscreditcards.com/maxrewards 💳👉VIEW CREDIT CARD OFFERS! https://markscreditcards.com/offers 🛍 RAKUTEN - Earn Cash Back! http://markscreditcards.com/rakuten ‼️ GET FREE STOCKS FROM WEBULL when you open an account & deposit $100: http://markscreditcards.com/webull RULES OF ANNUAL FEES Rule #1: In Year 1, the welcome bonus might justify a card’s annual fee. Example: Earn $500 Bonus – Pay $95 Annual Fee = PROFIT $405 Rule #2: In Year 2 and beyond, ensure you get more value from a card than the cost of its annual fee. This can be from: - Rewards: points / cash back - Benefits: Airport lounge access, flight perks, hotel perks, special access / treatment, etc. - Credits: Statement credits issued monthly, semi-annually, or annually - Insurance / Protections: Rental car CDW, lost luggage reimbursement, trip delay insurance, cell phone protection, extended warranty, etc. Rule #3: If you don’t get more value than the cost of the fee, consider downgrading or canceling the card. Rule #4: Never let a card’s “value” cause you to pay for things that you wouldn’t normally buy with cash. For example, many airport lounges allow you to buy individual day passes. If a day pass is $50, would you normally pay for that if you didn’t have a credit card that provided lounges access? If yes, then great! If not, then it probably doesn’t make sense for you to get a credit card with lounge access benefits because that card will likely have an annual fee that would need to be justified. NOTE… The monthly spend figures AND valuation of the credits & benefits used in the video are examples designed for illustrative purposes only. I encourage you to go through the same process with your own monthly spend and valuation of the card credits & benefits. JUSTIFYING THE FEES Based on $28,400 spend per card, distributed over their own rewards categories. Card #1: Citi Premier Card Points Earned: 60,400 Citi ThankYou Points Value of Points Earned: $604 (travel via Citi ThankYou portal) Value of Credits Used: $100 Value of Benefits Used: $120 Total Value: $824 - Annual Fee: $95 = Profit: $729 Card #2: American Express Gold Card Points Earned: 61,200 Amex Membership Rewards Points Value of Points Earned: $612 (flights via Amex portal) Value of Credits Used: $240/yr. Value of Benefits Used: $100/yr. Total Value: $952 - Annual Fee: $250 = Profit: $702 Card #3: Marriott Bonvoy Brilliant American Express Card Points Earned: 66,400 Marriott Bonvoy Points Value of Points Earned: $464.80 (Marriott hotels & resorts) Value of Credits Used: $300/yr. Value of Benefits Used: $496/yr. Total Value: $1,260.80 - Annual Fee: $450 = Profit: $810.80 ALSO… Be aware that card-linked offers (e.g. Amex Offers) can be another great way to recoup the cost of a card’s annual fee. Overall, it can definitely make sense to keep credit cards that have annual fees as long as your income, travel, spend, etc. can make sense of them. One way to look at it is annual fees are like prepaying for things you’d normally buy anyway. You pay for the rewards / benefits up front, and then earn them back throughout the year. And of course, the best result is not only breaking even, but rather getting into profit so that the card gives you more value than you pay for it. Disclosure: This site is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as CreditCards.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. Mark Reese is not a financial advisor. #creditcards #creditcardannualfees #americanexpress