Are credit card annual fees worth the cost?

Are credit card annual fees worth the cost?

Most points-earning credit cards attract an ‘annual fee’, with Platinum and Black cards at the top of the spectrum – but is it actually worth paying hundreds, or even thousands of dollars a year just to keep that shiny piece of plastic in your wallet for another 12 months?

The way we see it, it depends on how much value that card will unlock along the way: not just from the points you can earn on everyday spend (and any sign-up bonus in the first year), but also the benefits you’ll enjoy like airport lounge access, travel vouchers and other perks.

Not every card will pay for itself, but here are a few things to look out for that can make paying credit card annual fees worth the investment.

1. American Express ‘Travel Credits’

Several American Express credit cards tempt with a ‘Travel Credit’ every year – that’s a voucher you can put towards the cost of your next journey, offsetting the sting of the card’s annual fee.

Take the popular American Express Explorer credit card as an example. There’s a $395 annual fee to pay, but every year you’ll get $400 Travel Credit in return that can go towards a flight, hotel or car hire booking of your choice.

This means if you were going to spend $400 or more on travel anyway, the Explorer card is practically ‘free’: ditto the $195/year American Express Platinum Edge credit card, which features a yearly $200 Travel Credit.

At first glance, the $450/year Qantas American Express Ultimate Card also looks a tad pricey, but when you consider that a yearly $450 Qantas Travel Credit comes as part of the parcel – and can be used towards a Qantas flight booking – it’s another card that breaks even for those who fly.

2. Free return flights, airport lounge passes or fee waivers

Having a Travel Credit isn’t the only time an annual fee is worth paying – other perks can justify the expense as well.

Take the $225/year ANZ Rewards Travel Adventures Visa as an example. When you apply and spend $500 on purchases in the first three months (which could be anything you’d otherwise be buying anyway), you’ll get a free domestic return flight with Virgin Australia every year until the card is cancelled.

There’s a generous range of routes you can travel on (examples from Sydney pictured below), including those often-pricey transcontinental treks between Perth and Sydney, Melbourne and Brisbane – even if starting your journey on the east coast – and you’ll get two yearly Virgin Australia lounge passes too, valued at $65 each.

That means you’re only really ‘paying’ $95 for a return domestic flight, which would likely cost you much more if you didn’t have the card, and if you’re a Gold or Platinum frequent flyer and don’t really need the lounge passes, ANZ also waives its usual 3% international transaction fee on this card, saving you money when flying abroad.

American Express’ $375/year Velocity Platinum credit card also features a return Virgin Australia domestic flight to use on selected routes which we’d value at around $250-300, plus two Virgin lounge passes worth $65 each, and two AMEX Lounge passes worth $55 each.

For those who travel, that card may ‘cost’ $375 every year, but when you’re getting at least $490 a year back in benefits – if not more – the annual fee has more than paid for itself before points even come into the equation.

3. Discounts on unlimited airport lounge membership

Plenty of people shell out for Qantas Club membership for year-round lounge access, but the right credit card can save you money on this too.

Enter: ANZ’s Frequent Flyer Black Visa, which offers cardholders discounts of up to $497 on the first year of paid Qantas Club membership, reducing the cost down from $939 (including joining fee) to only $442.

In future years, that membership can also be renewed for $442/year as opposed to $540, giving an ongoing saving of $98/year.

Given that ANZ’s Frequent Flyer Black Visa annual fee is currently waived in the first year (being $425/year thereafter), you’d only need to consider the value of the card’s other perks like international travel insurance and extended warranty cover from year three and beyond, as the Qantas Club savings more than offset your costs until that point.

4. Instant savings on restaurant spend, travel

HSBC Platinum Qantas Visa cardholders now receive complimentary membership in the Frequent Values program by Entertainment: the company behind the popular ‘Entertainment books’.

With a $199 annual fee and many participating restaurants offering discounts of up to $25 per visit, dine eight times in a year and you're all set.

The Frequent Values scheme also provides discounts with airlines, hotels, car hire companies and travel insurers. Members can save 5% on Virgin Australia domestic airfares and 5-10% on Emirates flights, for example.

5. The whole shebang

At the upper end of the scale, the $1,200/year American Express Platinum charge card certainly isn’t for everybody, but being designed around those who travel frequently, high flyers may find the card paying for itself.

It starts with a yearly $300 Travel Credit – again, which can be used towards flight, hotel or car hire bookings – reducing the ‘cost’ of the annual fee down to $900.

There’s also unlimited Virgin Australia domestic lounge access whenever flying with the airline, avoiding the need to pay $750 for the first year of lounge membership or $420 to renew that membership, trimming the annual fee’s sting down further to $480.

Then, there’s not one, but two complimentary and unlimited Priority Pass lounge memberships thrown in – one for the primary cardholder and one for an additional cardholder like a spouse or partner – valued at US$409 (A$536) each, or A$1,072 overall.

Not only do Priority Pass memberships unlock over 1,000 airport lounges across the globe, they also provide A$36 of dining credit at a range of restaurants and bars every time you fly through Sydney and Brisbane domestic and international airports, which can quickly add up too.

Without even considering the other perks like Delta Sky Club access, travel insurance, access to AMEX Fine Hotels and Resorts and of course, the points you can earn, that’s at least $1,792 in benefits each year compared to an annual fee of $1,200: putting you ahead by almost $600 from the get-go!

Chris Chamberlin
Chris Chamberlin is a senior journalist with Australian Business Traveller and lives by the motto that a journey of a thousand miles begins with a single step, a great latte, a theatre ticket and a glass of wine!
 

10 comments

  • Satoshi Takayama

    Michael Kao

    28 Nov, 2017 10:03 am

    Also there is the Citi Prestige. At current earn rate it's garbage. But the perk might be worth it for those who travel often.

    At $700 it also comes with one unlimited PP with 1 guest, 1 complimentary hotel stay (~$250), 2 x one way airport chauffeur, (~$100), and best of all, 4th night free for any hotels bookable on hotels.com. Of course with the RBA changes, who knows if these perks will stay.
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  • Will Dutton

    Kinkade

    28 Nov, 2017 10:05 am

    I've been thinking about the AMEX platinum for a while as I do travel quite a bit. I've noticed the signup points are lower than they have been at 80,000, does this cycle throughout the year?

    On another note I have the Bankwest World MC and that paid for it's $290 fee in one trip by saving me 540 Euro on a more car upgrade in Germany thanks to complimentary tier membership of Hertz plus about 800 euro for a missing luggage compartment tray that they made a hugeness about until they realised I had status with them. ( we never had the luggage tray but they wouldn't my pickup photos til I asked to speak to the CDP team)
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  • asw

    asw

    28 Nov, 2017 03:42 pm

    I try and maximise my AmEx Pt card offers, but they have future room to improve on the value curve.

    FWIW: AmEx dropped fees and increased reward earn rates to fight back against the Chase Sapphire Reserve card when that launched in the USA.

    No member give thanks

  • Satoshi Takayama

    Michael Kao

    28 Nov, 2017 05:28 pm

    Unfortunately we don't have that sort of competition here thanks to RBA. Citi prestige used to be the closest threat to Amex and therefore Amex was giving out huge sign up bonuses like candies.

    Now the earn rate of Citi prestige is only a tiny fraction of Amex's earn rate, there is absolutely no incentive for Amex to increase their offer. In fact, I expect possible future devaluations from Amex.
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  • Chris Chamberlin

    ChrisCh

    28 Nov, 2017 05:40 pm

    AMEX's primary advantage over other issuers is its rewards offering, and the focus for AMEX lately has been to improve that further (such as by axing the lower earning rates for utility and insurance payments on many cards and award full points on these charges, and to improve the baseline earn rate on its airline cards by 50% (e.g. Qantas Ultimate and Velocity Platinum increasing from 1.0 to 1.5 points per $1 spent on everyday charges, as a trade-off for getting rid of bonus points on things like restaurant and misc. travel spend except on the Platinum Charge).

    Any devaulation from AMEX is reasonably unlikely at this point, and AMEX HQ has assured me that their latest move to cut merchant rates for small businesses to boost acceptance won't have an impact on the number of points people can earn.

    (Of course, you never say never with things like devaluations, but my understanding is that their focus is on improving things for cardholders rather than cutting points or perks.)
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  • Stefan Kane

    DrSK

    28 Nov, 2017 05:51 pm

    I don't know if this is still the case, but my AmEx Platinum charge card came with a fee-free Platinum Reserve credit card, which itself now has a $400 travel credit, taking the total to $700. These credits, and the top-level travel insurance, justify the annual fee for me ... lounge access is the icing on the cake (and is really only of relevance in the US, where J/F tickets don't generally grant entry to lounges).
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  • Matt J

    MattJelonek

    28 Nov, 2017 07:23 pm

    Amex Charge Card also gets you into their Centurion Lounges!
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  • Chris Chamberlin

    ChrisCh

    28 Nov, 2017 07:54 pm

    And plenty of others, too. ;)
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  • Matt J

    MattJelonek

    28 Nov, 2017 07:57 pm

    Which!? !
    No member give thanks

  • RTWFF

    RTWFF

    2 Dec, 2017 11:06 am

    There's no such thing as an annual fee on my ANZ Rewards Black Visa card - that's because it comes as part of a banking package along with my mortgage
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26 May, 2019 11:50 pm

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