Are Travel Rewards Worth the Annual Fee?
There are dozens of travel rewards cards on the market, all with their own unique offers. Most come with an annual fee, and those that don’t usually have loyalty programs which are far less lucrative. Many consumers wonder if the travel rewards cards are worth the annual fee.
Recent research from MagnifyMoney shows the average introductory bonus for travel credit cards is 40,556 points, more than double the 16,050 point average in 2008. But annual fees have also increased significantly. Travel credit cards with a bonus offer currently have an average annual fee of $120, up from $74 in 2008.
The most notable example of a travel card with a hefty price-tag is the Chase Sapphire Reserve Card, which entered the market with a staggering $450 annual fee. Users were quick to sign up for this card because it gave an equally-hefty bonus offer: 100,000 points after spending $4,000 in the first three months. In January 2017, Chase announced they would be dropping the bonus to just 50,000 points, making the annual fee far less desirable.
To determine if a travel card is worth its annual fee, you must consider several factors:
- How easy is it to earn points?
- Do my spending habits line up with the credit card’s rewards program?
- How much value do the points have?
- Do the points expire, and if so, when?
- Can I realistically earn enough points to offset the annual fee?
- Is there a card with a lower annual fee that would still provide the rewards I need?
- Where can the rewards be used? (airline miles, hotels, rental cars, etc.)
Think about how you will use the card and how much you plan to spend on it per month. If you can earn significantly more rewards than the annual fee, it may be worth applying for that card. If your rewards barely cover the annual fee, you’re not really saving any money. At that point, you may be better off with a cash back credit card or other rewards program to get the best return for your personal expenses.