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Premium credit cards are premium for a reason, offering hundreds of dollars in credits for hotels and flights, special airport lounge access, and often, some cachet.
But carrying one has gotten significantly more expensive. Last year, JPMorgan Chase and American Express raised the annual fees on two of the market heavyweights, lifting the Chase Sapphire Reserve's from $550 to $795 and the Amex Platinum's from $695 to $895. Even the Robinhood Platinum card, a new entrant this year, came out of the gate charging $695.
So the question is: Are you getting your money's worth? (Meaning enough perks you actually use and find valuable?) And if you don't have a premium card, how do you know if the fee is worth it?
How to decide if the fees are worth it
Premium cards can easily pay for themselves, but only if the benefits don't go to waste. If you're weighing a card you already have, your statements will tell you a lot. Add up the value of the benefits you got over a year's time to see if you at least earned your annual fee back.
There's more guesswork involved if you don't have the card yet, but you can still estimate which benefits you'll use using a guide like this one from The Wall Street Journal. If that Apple TV/Music subscription, Uber Cash credit or DoorDash membership are the draw, add up what you'd pay for those otherwise.
Keep in mind: The total “card value” touted on an issuer's website may be in the thousands, but very few cardholders cash in on all those perks, and some are difficult to earn. For example, the $300 dining credit on the Sapphire Reserve can only be used at participating restaurants in certain cities, which could make it useless to people who don't spend time in those places.
Beyond the basic math, there are other important considerations. Start by asking yourself these questions:
Would you spend this money anyway? If you're spending money to use up a credit, you're not actually saving any money. Just the opposite. Make sure you're not manufacturing extra purchases just to justify the annual fee.
Are there aggravating strings attached? The fine print can make a seemingly great perk less great. For example, the Robinhood Platinum card originally had $250 in DoorDash credits, but cardholders didn't like that they could only be used $10 at a time on orders of $50 or more, according to the Journal. So last week the company removed the minimum order size as part of a revamp of the card. (Same $10 credits, but the annual limit was cut to $120.)
Do you enjoy playing the rewards game (including doing the extra work)? Along similar lines, if you want to milk the value of your card, you have to play the points and perks game. That means remembering to opt in for statement credits, comparing point values across partner airlines and hotels, and scooping up limited-time offers. It can also require paying for different items with different cards (to maximize the rewards). If these sorts of things give you a headache, go with a card that has a simpler rewards structure and lower fee.
Has the card outlived its usefulness? Premium cards tend to have travel-centric perks. If you got the card to score a valuable welcome offer or other bennies for your big trip to Europe, is it still worthwhile a year later? A downgrade may be in order if you don't have similar trips on the horizon.
Do you carry a balance? Ideally you're avoiding interest charges on any credit card, but with a premium card, the math makes even less sense. If you're struggling to pay your balance in full each month, you're better off with a no-fee card. Otherwise you're effectively cancelling out the rewards.
Is status the allure? Part of the draw of premium cards is the exclusivity they bring. You get to be part of a secret metal card club that may feel like it comes with a “backstage pass” to luxury. But 21% of cardholders now carry at least one premium credit card, PYMNTS Intelligence reported last year. If you think you'd find those airport lounges too overcrowded to be enjoyable, it's worth reconsidering.
So what?
As annual fees climb, the burden of proof is shifting. The perks on a premium credit card might easily be worth double or triple the annual fee. But you don't want marketing numbers to substitute for real-world math. Be realistic about the benefits you use, how they fit into your lifestyle, and the spending you'd do otherwise. Only you know a card's true value.
Related Reading
The Premium Credit Card Trap (Fox 5 via Yahoo)
Premium Travel Cards Are Leaving Average Consumers Behind (Bankrate)
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