American Express is launching new platinum business cards.
Courtesy: American Express
The issuer pushes the annual fees for some premium travel reward credit cards higher, so experts say it’s important for consumers to consider whether such cards are worth the cost.
On Thursday, American Express announced that the annual fee will be $895 for the consumer and business versions of the Platinum credit card. That’s about 29% more than the current cost of $695 a year.
In June, the Chase Sapphire Reserve Card raised its annual fee to $795. This is a 45% jump from the previous annual cost of $550. In July, Citi introduced City Strata Elite, a premium travel credit card that costs $595 a year.
Other credit cards have changed conditions to access perks such as airport lounges. Early this year, Capital 1 Starting in February, customers using Venture X Rewards and Venture X business cards (each with an annual fee of $395) announced that they will no longer be able to bring guests to the lounge for free.
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With an increase in annual fees, you will need to assess whether the card perks are worth the cost.
“The annual fees aren’t inherently bad. You need to make sure you get value from (the card),” said Ted Rothman, senior industry analyst at Bankrate. “But it’s getting harder to maximize.”
One habit can “easily reduce” travel card values
Travel reward cards are likely to be of good value if you have a balance each month, experts say.
“The interest you owe will easily reduce the value of any of these benefits,” says Sally French, travel expert at Nerdwallet.
It may also be difficult to pay off your debts. According to Rothman, the average annual rate for credit cards is around 20.13%, but the typical rate for premium travel cards can be close to 25% to 30%.
“Generally speaking, reward cards charge a higher fee,” he said.
According to experts, here’s how to determine whether a travel credit card is worth investing:
Decided: Wide range of travel cards, or brand specific?
You will come across two types of travel credit cards. Co-branded credit cards are usually tied to a particular airline, hotel or even cruise chain, offering more valuable benefits with that brand, French said.
If you use a particular airline frequently or tend to stay in a particular hotel chain, co-branded credit cards may be worth it, experts say.
For example, an airline credit card may have benefits such as free check bags, priority boarding, premium status tier, and sometimes discounts and points on spending on that airline.
“It’s just the free (check) bags from that airline,” French said. “Your Southwest credit card won’t get you anything at United.”
Some airlines belong to partnership networks such as Star Alliance, OneWorld, and SkyTeam. If you are looking at brand-specific cards, check if the company has a partnership that allows you to move points or miles to the Allied Brand.
Meanwhile, the French said that a typical travel credit card can be “really good for people who don’t want to marry a particular brand,” and earned more widely and could be used.
Some travel credit cards do not charge an annual fee. According to Nerdwallet, costs range from $95 to $500 or more per year. Please note that travel credit cards with little or no fees may not offer the same level of benefits and rewards as paid cards.
Both types of travel cards tend to have a set of similar perks, including credits for TSA Precheck and other pre-screening memberships. As a frequent traveler, such benefits help to match the cost of your card fee, experts say.
To assess the benefits of the card, take a look at a detailed list of perks on the issuer’s website, French said. The card may charge an annual fee, but it says it includes a free check bag and a certain amount of guests. With that perk, the card could pay for itself on one or two trips for the family.
How to know which card is best for you
While some perks and rewards may seem appealing, it’s important to consider travel habits and lifestyle, Rothman said. Also, think about what your trust habits are, experts say.
For those who don’t travel frequently, a travel credit card with no annual fees is probably the best option, French said.
“I don’t want to pay an annual fee with a credit card that has an advantage you may not use,” she said.
French said co-branded credit cards don’t make sense when travelling frequently in certain years, usually using certain airlines.
If you currently have a card with a higher annual fee, but realize you’re not making the most of it, you could downgrade to a cheaper or free card than the issuer offers, Rothman said.
He said that doing so would be better for your credit than closing your card completely.
